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Certain effects of random taxes

Author

Listed:
  • James Hines Jr.
  • Michael J. Keen

    (UTokyo - The University of Tokyo, IFS - Laboratory of the Institute for Fiscal Studies - Institute for Fiscal Studies, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

Abstract

This paper explores the implications of tax rate randomness, identifying circumstances in which revenue-neutral rate variability increases profitability, economic activity, and the efficiency of resource allocation. Furthermore, with heterogeneous taxpayers, tax rate variability is shown to perform an efficiency-enhancing screening function, imposing heavier expected tax burdens on less responsive taxpayers. And while efficient tax randomness enables governments to reduce average costs of taxation, it necessarily increases the marginal cost of taxation over some ranges of expected revenue, so may reduce efficient levels of government spending.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • James Hines Jr. & Michael J. Keen, 2021. "Certain effects of random taxes," Post-Print hal-03420151, HAL.
    • Handle: RePEc:hal:journl:hal-03420151
    DOI: 10.1016/j.jpubeco.2021.104412
    Note: View the original document on HAL open archive server: https://hal.science/hal-03420151v1
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    Cited by:

    1. Stéphane Gauthier & Guy Laroque, 2022. "Optimal Random Taxation and Redistribution," Sciences Po Economics Publications (main) hal-03915336, HAL.
    2. Teuku Naraski Zahari & Benjamin C. McLellan, 2023. "Review of Policies for Indonesia’s Electricity Sector Transition and Qualitative Evaluation of Impacts and Influences Using a Conceptual Dynamic Model," Energies, MDPI, vol. 16(8), pages 1-22, April.
    3. Giacomo Brusco & Benjamin Glass, 2023. "Risky business: policy uncertainty and investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1331-1345, October.
    4. Marco de Pinto & Laszlo Goerke, 2022. "Cost uncertainty in an oligopoly with endogenous entry," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 927-948, October.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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