西方财政学 Chap13

1 Chapter13 TaxationandEfficiency PublicEconomics 2 Introduction Arepeopleunaffectedbyataxincreaseiftheypayzerointaxesafterwards No consumptionmayhavechangedinresponsetothetaxincreaseBundleconsumedislessdesirableExcessburdenisalossofwelfareaboveandbeyondthetaxrevenuescollected 3 ExcessBurdenDefined TwocommoditiesBarleyandcornFixedincomePbandPcarepricesofgoodsNodistortionssuchasexternalities imperfectcompetition publicgoods etc 4 ExcessBurdenDefined Figure13 1showsthebudgetconstraint AD withutilitymaximizedatbundleE1 Ad valoremtaxleviedonbarleyatratetbraisesthepriceto 1 tb Pb androtatesthebudgetconstraintalongthex axis ThenewbudgetconstraintisAF Figure13 1 6 ExcessBurdenDefined Ateachconsumptionlevelofbarley theverticaldistancebetweenADandAFshowstaxpaymentsintermsofforgonecorn NormalizePc 1sothatverticaldistancecanbemeasuredineitherquantityofcornordollars 7 ExcessBurdenDefined Figure13 2showsnewoptimizingchoicewiththehigherpricesalongbudgetconstraintAF UtilitymaximizedatbundleE2 Verticaldistancebetweenold newbudgetconstraintsisGE2isthe taxbill 8 ExcessBurdenDefined Anytaxwilllowerutility butisthereanalternativetaxthatraisesthesamerevenue GE2 butentailsasmallerutilityloss Orgreaterrevenuewiththesameutilityloss Ifso thetaxonbarleyleadstoexcessburden Figure13 2 10 ExcessBurdenDefined Equivalentvariationistheamountofincomewewouldhavetotakeaway beforeanytaxwasimposed toinduceamovetothelowerindifferencecurve Takingawayincomeisequivalenttoaparallelmovementinwardonthebudgetconstraint BudgetconstraintHIinFigure13 3showsthis Figure13 3 12 ExcessBurdenDefined NotethatME3 GN GE2 butbothgivetheconsumerthesameutility Thus thedifferenceE2Nistheexcessburdenofthebarleytax Thebarleytaxmakesthepersonworseoffbyanamountthatexceedstherevenueitgenerates 13 ExcessBurdenDefined Lumpsumtaxisataxthatmustbepaidregardlessofthetaxpayer sbehavior BudgetconstraintHIsatisfiesthis Revenueyieldexactlyequalstheequivalentvariation Conclusion Lumpsumtaxhasnoexcessburden 14 QuestionsandAnswers Whyaren tlumpsumtaxeswidelyused Construedasunfairbecausepeople sabilitiestopayvaryHowdolumpsumtaxesrelatetowelfareeconomics Theequilibriumconditionsbecome 15 QuestionsandAnswers Intuitively whenMRS MRTthemarginalutilityofsubstitutingbarleyconsumptionforcornconsumptionexceedsthechangeinproductioncostsfromdoingso Inthepresenceofthetax thereisnofinancialincentivetodoso 16 QuestionsandAnswers Intuitively whenMRS MRTthemarginalutilityofsubstitutingbarleyconsumptionforcornconsumptionexceedsthechangeinproductioncostsfromdoingso Inthepresenceofthetax thereisnofinancialincentivetodoso 17 QuestionsandAnswers Doesanincometaxentailexcessburden Itusuallydoesentailexcessburden ifathirdcommodity leisure exists Ifdemandforacommodityisperfectlyinelastic isthereexcessburden Yes seeFigure13 4 Figure13 4 19 QuestionsandAnswers InFigure13 4 theordinary uncompensated demandcurveisinelastic B1 B2whenthepriceincreases Butthisisbecausetheincomeeffectoffsetsthesubstitutioneffect Thesubstitutioneffectisthepartnecessarytocomputeexcessburden Thecompensateddemandcurve whichholdsutilityconstantaspriceschange istherelevantone andtheelasticityforitisnon zero 20 ExcessBurdenMeasurementwithDemandCurves Consideracompensateddemandcurve suchastheoneinFigure13 5 Imposeanad valoremtaxonbarley sothatitspriceincreasesto 1 tb Pb Equivalenttothesupplycurveshiftingupward Figure13 5 22 ExcessBurdenMeasurementwithDemandCurves Excessburdenequaltotrianglefid Throughsomemathematicalmanipulation thiscanbeexpressedas 23 ExcessBurdenMeasurementwithDemandCurves Implicationsofformula Higher compensated elasticitiesleadtolargerexcessburdenExcessburdenincreaseswiththesquareofthetaxrateThegreatertheinitialexpenditureonthetaxedcommodity thelargertheexcessburden 24 DifferentialTaxationofInputs Someinputsaretaxeddifferentlydependingonwheretheyareused Capitalusedinthecorporatesectorissubjecttoahighertaxratethancapitalusedinthenoncorporatesector LaborusedinthehouseholdisuntaxedFigure13 8measurestheefficiencycost Figure13 8 26 DifferentialTaxationofInputs Inthisfigure totalamountoflaborisfixedatOO Movingalongthex axissimplyshiftslaborfromthelabormarkettothehouseholdsector VMPisthevalueofmarginalproduct orthedollarvalueoftheadditionalinputproducedfromanhourofwork VMPdeclineswithhoursworkedinasector Optimalallocationofhoursequatesmargins suchthatOH isspentinhouseholdproduction andO H isspentinthemarket 27 DifferentialTaxationofInputs Ifataxisleviedonmarketwork butnothouseholdproduction thenthe effective VMPcurveformarketworkrotatesdownward Figure13 9showstheeffects Figure13 9 29 DifferentialTaxationofInputs Peopleshifthoursintonon marketwor