Costs Of Taxation And The Benefits Of Public Goods
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Author | : Will Martin |
Publisher | : World Bank Publications |
Total Pages | : 31 |
Release | : 2005 |
Genre | : Labor supply |
ISBN | : |
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The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. The authors confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation-and will provide the same result-as long as the income effects of both taxes and public good provision are incorporated in a consistent manner.
Author | : James E. Anderson |
Publisher | : |
Total Pages | : |
Release | : 2010 |
Genre | : |
ISBN | : |
Download Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods Book in PDF, Epub and Kindle
Author | : James E. Anderson |
Publisher | : |
Total Pages | : 28 |
Release | : 2017 |
Genre | : |
ISBN | : |
Download Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods Book in PDF, Epub and Kindle
The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor -- through income effects. However, the consensus is wrong because the income effects of taxes must be considered symmetrically with those from provision of public goods. This paper uses a model with multiple public goods and taxes to derive consistent measures of the marginal benefits of publicly-provided goods and their marginal social costs. With this model, the authors show that either compensated approaches excluding these income effects or uncompensated approaches including them may be used. If an uncompensated measure of the marginal cost of funds is used, however, the benefits of providing public goods should be adjusted with a simple, benefit multiplier not previously seen in the literature. Once this is done, the optimal level of public provision is independent of whether compensated or uncompensated approaches are used. Proper accounting for these income effects -- or their omission using a compensated approach -- appears to substantially raise the hurdle for government provision where there are substantial taxes bearing on labor.
Author | : Will Martin |
Publisher | : |
Total Pages | : |
Release | : 2012 |
Genre | : |
ISBN | : |
Download Costs of Taxation and the Benefits of Public Goods Book in PDF, Epub and Kindle
The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. The authors confirm that this difference remains substantial with newer elasticity estimates, but show that either compensated or uncompensated measures of the marginal cost of funds can be used to evaluate the costs of taxation-and will provide the same result-as long as the income effects of both taxes and public good provision are incorporated in a consistent manner.
Author | : Yew-Kwang Ng |
Publisher | : |
Total Pages | : 0 |
Release | : 2000 |
Genre | : |
ISBN | : |
Download The Optimal Size of Public Spending and the Distortionary Cost of Taxation Book in PDF, Epub and Kindle
Feldstein (1997) reviews his and others' contributions in the distortionary costs of taxation, arriving at a remarkable estimate that the cost per incremental dollar of government spending is a very high $2.65. Kaplow (1996) argues that it is optimal to supply a public good whenever the benefit/cost ratio exceeds one, contrary to the orthodox position since Pigou (1928) that the benefits of public goods must exceed their direct costs by an amount sufficient to outweigh the distortionary costs of taxation. This paper largely reconciles these two apparently opposing positions. The large distortionary costs exist on the revenue side but is largely offset by the negative distortionary costs or distributional gain on the spending side. However, both Kaplow's and Feldstein's arguments have to be subject to important qualifications. Additional arguments relevant to the central public finance question "How big should the public spending be?" are also reviewed. The prevalence of environmental disruption effects, the existence of burden-free taxes on diamond goods, and the importance of relative-income effects all favor the lowering of the required benefit/cost ratio for public goods and, as a rule, more public spending. The reason for the difference between the existence of distortion (in comparison to a lumpsum tax) as emphasized by Browning and Liu (1998) and the unitary marginal cost of public fund is also explained graphically.
Author | : Edward Clarke |
Publisher | : iUniverse |
Total Pages | : 298 |
Release | : 2000 |
Genre | : Business & Economics |
ISBN | : 0595089305 |
Download Demand Revelation and the Provision of Public Goods Book in PDF, Epub and Kindle
The demand revelation process has been called a new and superior process for making social choices and holds some promise of creating an intellectual revolution in economics and politics. It relies on a so-called “Clarke tax” or pivot mechanism to ensure that individuals will adequately consider the social cost of their influence on social outcomes, thereby ensuring truthful revelation of preferences and overcoming the “free rider” problem of public goods provisioning. Demand Revelation and the Provision of Public Goods outlines Clarke’s approach to use demand revelation in the creation of demand revealing markets accompanied by the improved management of social entitlements to public goods and services. Based on these refinements, he shows ways to achieve improved government performance in areas of taxation, spending and government regulatory management. In this revised edition of his original 1980 book, Clarke reviews other recent related work, notably Martin Bailey’s Constitution for a Future Country, which describes in detail how these advances in an improved political economy can be achieved.
Author | : Charles L. Ballard |
Publisher | : |
Total Pages | : 0 |
Release | : 1990 |
Genre | : |
ISBN | : |
Download Distortionary Taxes and the Provision of Public Goods Book in PDF, Epub and Kindle
When comparing marginal costs and benefits of a public project, most economists think in terms of adding together the marginal costs of production plus marginal costs of additional distortionary taxation. This paper clarifies how the "revenue effect" offsets the "distortionary effect." For Cobb-Douglas utility with a marginal increase in a proportional wage tax, they exactly offset each other and the Samuelson rule is unaffected. Also, with a preexisting wage tax, an incremental lump-sum tax has only this "revenue effect:" it increases labor supply, increases tax revenue from the preexisting wage tax, and thus makes the project easier to fund. In our numerical example, the incremental lump-sum tax costs taxpayers only $.77 per dollar raised.
Author | : Edgar K. Browning |
Publisher | : MacMillan |
Total Pages | : 552 |
Release | : 1983 |
Genre | : Business & Economics |
ISBN | : |
Download Public Finance and the Price System Book in PDF, Epub and Kindle
Author | : Gunnar S. Eskeland |
Publisher | : World Bank Publications |
Total Pages | : 38 |
Release | : 1999 |
Genre | : |
ISBN | : |
Download Public Expenditures and Environmental Protection Book in PDF, Epub and Kindle
Pigou's conjecture was that under costly taxation public expenditures should not reach the point where marginal benefits equal marginal costs. In the treatment here, public expenditures (and environmental protection) may provide public goods for consumption but also collective inputs for production. When the benefits are in production, the cost of funds is irrelevant. Why? Collective inputs benefit goods that are taxed, while for public goods the shadow price of funds reduces provision as if they were.
Author | : Mr.Joel Slemrod |
Publisher | : International Monetary Fund |
Total Pages | : 32 |
Release | : 1995-08-01 |
Genre | : Business & Economics |
ISBN | : 1451954549 |
Download The Costs of Taxation and the Marginal Cost of Funds Book in PDF, Epub and Kindle
It is argued that taxation causes three kinds of deadweight losses and two types of direct costs. The deadweight losses arise from substitution, evasion, and avoidance activities while the direct costs are administrative and compliance costs. Some of these social costs tend to be discontinuous and/or nonconvex. Because most models of taxation ignore some components of the social costs of taxation, their conclusions cannot be of a general nature. An alternative approach to policy evaluation is to rely on a marginal efficiency cost of funds rule which can indicate appropriate directions of reforms. The paper discusses its merits, applicability, and limitations, as well as its relationship to other concepts.