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From each according to his surplus: Equi-proportionate sharing of commodity tax burdens

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  • Hines, James Jr.
  • Hlinko, John C.
  • Lubke, Theodore J. F.

Abstract

This paper examines the incidence of commodity taxes, finding that, when demand and marginal cost schedules are linear. the burden of commodity taxation is distributed between buyers and sellers so that each suffers the same percentage reduction on pre-tax surplus. This equiproportionate reduction in surplus is the outcome of commodity taxes set at any rate, and is unaffected by relative demand and supply elasticities. Hence, when demand and marginal cost schedules are linear, commodity taxes resemble flat-rate taxes imposed on market surplus. Similar results apply to nonlinear schedules with certain ranges.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 58 (1995)
Issue (Month): 3 (November)
Pages: 417-428

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Handle: RePEc:eee:pubeco:v:58:y:1995:i:3:p:417-428

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Web page: http://www.elsevier.com/locate/inca/505578

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  2. Vartia, Yrjo O, 1983. "Efficient Methods of Measuring Welfare Change and Compensated Income in Terms of Ordinary Demand Functions," Econometrica, Econometric Society, vol. 51(1), pages 79-98, January.
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  7. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-60, April.
  8. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
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  13. Zeckhauser, Richard & Schelling, Thomas, 1977. "Taxes in fantasy, or most any tax on labor can turn out to help the laborers," Journal of Public Economics, Elsevier, vol. 8(2), pages 133-150, October.
  14. McKenzie, George W, 1979. "Consumer's Surplus without Apology: Comment," American Economic Review, American Economic Association, vol. 69(3), pages 465-68, June.
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  16. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
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Cited by:
  1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  2. Tokarick, Stephen, 2006. "A simple rule for assessing tariff and tax incidence," Economics Letters, Elsevier, vol. 93(1), pages 116-120, October.

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