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Measuring Effective Tax Rates in the Presence of Multiple Inputs: A Production Based Approach

  • Kenneth McKenzie

    ()

  • Jack Mintz

    ()

  • Kimberly Scharf

We suggest a new method for comparing tax regimes acrossjurisdictions. The approach aggregates taxes on inputs by focussingon production, rather than investment, decisions. Taxes on variousinputs affect production decisions by increasing marginal costs.By calculating the difference between the tax-inclusive and tax-exclusivemarginal cost of production, we determine the effective excisetax rate on marginal costs implied by all of the various taxesimposed upon the firm‘s inputs. The effective tax rate on marginalcosts provides a convenient summary measure of the potentialimpact of taxes on all inputs on production location decisions. Copyright Kluwer Academic Publishers 1997

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File URL: http://hdl.handle.net/10.1023/A:1008620522432
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 3 (July)
Pages: 337-359

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:337-359
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  1. King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226436319.
  2. Kenneth McKenzie & Jack Mintz, 1992. "Tax Effects on the Cost of Capital," NBER Chapters, in: Canada-U.S. Tax Comparisons, pages 189-216 National Bureau of Economic Research, Inc.
  3. John B. Shoven & John Whalley, 1992. "Canada-U.S. Tax Comparisons," NBER Books, National Bureau of Economic Research, Inc, number shov92-1, June.
  4. Robin Boadway & Neil Bruce & Jack Mintz, 1984. "Taxation, Inflation, and the Effective Marginal Tax Rate on Capital in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 17(1), pages 62-79, February.
  5. Robin Boadway & Neil Bruce & Jack Mintz, 1981. "Corporate Taxation and the Cost of Holding Inventories," Working Papers 442, Queen's University, Department of Economics.
  6. Kenneth J. McKenzie, 1994. "The Implications of Risk and Irreversibility for the Measurement of Marginal Effective Tax Rates on Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 604-19, August.
  7. Gérard, Marcel & Beauchot, Laurence & Jamaels, Sylvie & Valenduc, Christian, 1997. "MESC (Marginal Effective Statutory Charge), an extension of King-Fullerton methodology," Discussion Papers, Series II 353, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  8. Alan J. Auerbach, 1980. "Wealth Maximization and the Cost of Capital," NBER Working Papers 0254, National Bureau of Economic Research, Inc.
  9. Chun-Yan Kuo & Thomas Mcgirr & Satya Poddar, 1988. "Measuring the Non-Neutralities of Sales and Excise Taxes in Canada," Development Discussion Papers 1988-08, JDI Executive Programs.
  10. Wilton, D & Prescott, D., 1993. "The Effects of Tax Increases on Wage and Labour Costs," Papers 93-29, Queen's at Kingston - School of Policy Studies.
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