Optimal commodity Taxation Case 2-Not all goods can be taxed May be impossible to tax non-market work Assume only taxes can be applied to goods X and Y In general, some excess burden is inevitable. Key question is how to select rates on x and y to minimize excess burden subject to the revenue constraint6 Optimal Commodity Taxation: Case 2 – Not all goods can be taxed • May be impossible to tax non-market work. • Assume only taxes can be applied to goods X and Y. • In general, some excess burden is inevitable. Key question is how to select rates on X and Y to minimize excess burden subject to the revenue constraint