Following the seminal work of late nineteenth century economist Etienne Laspeyres we analyse the incidence of the Prussian milling and slaughter tax shortly before its repeal in 1875. A comparison of flour prices in cities which levied this tax with cities that did not reveals unusually strong tax overshifting. Modern theories explain overshifting of a specific tax with quality improvements or imperfect competition. In pursuing these ideas we find that it was rather large surplus costs induced by tax collection and monitoring that caused unusually large excess burdens. The reason why the tax remained nevertheless basically unchanged for more than half a century is that the urban bourgeoisie successfully prevented its repeal, as the alternative would have been the introduction of municipal direct taxes (rent-seeking behaviour).
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
6058.
Find related papers by JEL classification: H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence B19 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Other N43 - Economic History - - Government, War, Law, and Regulation - - - Europe: Pre-1913
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