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From Each According to His Surplus: Equi-Proportionate Sharing of Commodity Tax Burdens

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  • James R. Hines, Jr.
  • John C. Hlinko
  • Theodore J.F. Lubke

Abstract

This paper examines the incidence of commodity taxes, finding that, when demand and marginal cost schedules are linear. the burden of commodity taxation is distributed between buyers and sellers so that each suffers the same percentage reduction on pre-tax surplus. This equiproportionate reduction in surplus is the outcome of commodity taxes set at any rate, and is unaffected by relative demand and supply elasticities. Hence, when demand and marginal cost schedules are linear, commodity taxes resemble flat-rate taxes imposed on market surplus. Similar results apply to nonlinear schedules with certain ranges.

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  • James R. Hines, Jr. & John C. Hlinko & Theodore J.F. Lubke, 1996. "From Each According to His Surplus: Equi-Proportionate Sharing of Commodity Tax Burdens," NBER Technical Working Papers 0138, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberte:0138
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    References listed on IDEAS

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    Cited by:

    1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
    2. Plewka, Jörg, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 19, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Segal-Halevi, Erel & Nitzan, Shmuel & Hassidim, Avinatan & Aumann, Yonatan, 2017. "Fair and square: Cake-cutting in two dimensions," Journal of Mathematical Economics, Elsevier, vol. 70(C), pages 1-28.
    4. Liqun Liu & Thomas R. Saving, 2005. "Market Substitution and the Pareto Dominance of Ad Valorem Taxation," Southern Economic Journal, John Wiley & Sons, vol. 72(2), pages 463-481, October.
    5. repec:zbw:rwirep:0019 is not listed on IDEAS
    6. Jörg Plewka, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 0019, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. Gregory A. Trandel, 1999. "Producers Lose: The Relative Percentage Reductions in Surplus Due to an AD Valorem Commodity Tax," Public Finance Review, , vol. 27(1), pages 96-104, January.
    8. Tokarick, Stephen, 2006. "A simple rule for assessing tariff and tax incidence," Economics Letters, Elsevier, vol. 93(1), pages 116-120, October.

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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