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Excess Burden of an Income Tax: What do mainstream economists really measure?
Dalarna University, School of Technology and Business Studies, Business Administration and Management.
2005 (English)In: The Review of Radical Political Economics, ISSN 0486-6134, E-ISSN 1552-8502, Vol. 37, no 4, p. 453-470Article in journal (Refereed) Published
Abstract [en]

An income tax can have side effects like decreased labor supply and lower effort levels. These side effects are important to consider in the decision of whether to introduce the tax. The terms deadweight loss and excess burden are used by mainstream economists in this context. In this article, it is argued that according to the measures they use, an excess burden is registered, even if there are no actual side effects. The explanation is that they actually measure the difference between the situation with the income tax and a situation with a hypothetical lump sum tax. Because lump sum taxes are not realistic alternatives, for administrative and political reasons, the conventional measurements are irrelevant from a policy perspective.

Place, publisher, year, edition, pages
2005. Vol. 37, no 4, p. 453-470
Identifiers
URN: urn:nbn:se:du-826OAI: oai:dalea.du.se:826DiVA, id: diva2:519460
Available from: 2005-01-10 Created: 2005-01-10 Last updated: 2017-12-07Bibliographically approved

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CiteExportLink to record
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  • ieee
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