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Measuring the Deadweight Costs of Corporate Income Tax Thresholds under Monopolistic Competition

Author

Listed:
  • Jason Nassios
  • Janine Dixon

Abstract

This paper extends the model of Dixon et al. (2004) by introducing taxes on non-labour income with thresholds into a simple firm-size framework. The modification allows analysis of how threshold-based corporate tax provisions distort firms' output decisions and create deadweight losses. By linking firm counts and average costs to the presence of a tax threshold, the model quantifies the efficiency costs associated with discontinuities in the effective tax schedule. The framework provides a transparent way to assess how threshold policies influence aggregate efficiency without relying on a full general equilibrium setting.

Suggested Citation

  • Jason Nassios & Janine Dixon, 2025. "Measuring the Deadweight Costs of Corporate Income Tax Thresholds under Monopolistic Competition," Centre of Policy Studies/IMPACT Centre Working Papers g-359, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-359
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    More about this item

    Keywords

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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