Time-saving goods, time inequalities and optimal commodity taxation

Time-saving goods are defined as market goods that reduce home labor requirements (e.g., restaurants; washing machines). Assuming that time savings are costly, this paper shows that lower income individuals can purchase fewer time savings and enjoy less leisure time. Commodity tax rates affecting low-income individuals should depend more on time savings, and less on the classic Corlett and Hague rule. The related literature suggests to impose lower tax rates on goods that require less home labor. This paper shows that goods that offer greater time savings with respect to their more affordable substitutes should also receive favorable tax treatment.