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How Big Should Government Be?

  • Feldstein, Martin
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    Suggests that the deadweight burden caused by a tax rate increase depends not only on labor force participation response but also on other dimensions of labor supply (the forms in which compensation is paid; the forms of tax-favored consumption; and intertemporal allocation of consumption.) Recent econometric work implies that the deadweight burden caused by incremental taxation (the marginal excess burden) may exceed one dollar per dollar of revenue raised, making the cost of incremental government spending more than two dollars for each dollar of government spending.

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    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 50 (1997)
    Issue (Month): 2 (June)
    Pages: 197-213

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    Handle: RePEc:ntj:journl:v:50:y:1997:i:no._2:p:197-213
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    1. repec:tpr:qjecon:v:110:y:1995:i:2:p:475-94 is not listed on IDEAS
    2. Auerbach, Alan J, 1995. "Tax Projections and the Budget: Lessons from the 1980's," American Economic Review, American Economic Association, vol. 85(2), pages 165-69, May.
    3. Martin Feldstein, 1995. "Tax Avoidance and the Deadweight Loss of the Income Tax," NBER Working Papers 5055, National Bureau of Economic Research, Inc.
    4. Feldstein, Martin S, 1978. "The Welfare Cost of Capital Income Taxation," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S29-51, April.
    5. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    6. Martin Feldstein & Andrew Samwick, 1998. "The Transition Path in Privatizing Social Security," NBER Chapters, in: Privatizing Social Security, pages 215-264 National Bureau of Economic Research, Inc.
    7. Lindsey, Lawrence B., 1987. "Individual taxpayer response to tax cuts: 1982-1984 : With implications for the revenue maximizing tax rate," Journal of Public Economics, Elsevier, vol. 33(2), pages 173-206, July.
    8. Joel Slemrod & Shlomo Yitzhaki, 1996. "The Costs of Taxation and the Marginal Efficiency Cost of Funds," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 172-198, March.
    9. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-62, June.
    10. Martin Feldstein, 1992. "The Effects of Tax-Based Saving Incentives on Government Revenue and National Saving," NBER Working Papers 4021, National Bureau of Economic Research, Inc.
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