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Costs of Taxation and the Benefits of Public Goods: The Role of Income Effects Author info | Abstract | Publisher info | Download info | Related research | Statistics Will Martin () (World Bank)
James E. Anderson () (Boston College)
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The fact that raising taxes can increase taxed labor supply through income effects is frequently used to justify very much lower measures of the marginal welfare cost of taxes and greater public good provision than indicated by traditional, compensated analyses. We 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.
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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number
617.
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Length: 27 pages
Date of creation: 08 Sep 2005Date of revision:
Handle: RePEc:boc:bocoec:617Contact details of provider: Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA Phone: 617-552-3670 Fax: +1-617-552-2308 Email: Web page: http://fmwww.bc.edu/EC/ More information through EDIRC
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Keywords: fiscal policy ; second best ; public goods ; distortions ; costs of taxation ; marginal cost of funds ; marginal excess burden ; thought experiment. ; Other versions of this item:
Find related papers by JEL classification: D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis F11 - International Economics - - Trade - - - Neoclassical Models of Trade H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
Chris Jones, 2005.
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