Search results
Results from the WOW.Com Content Network
An equivalent kind of inefficiency can also be caused by subsidies (which technically can be viewed as taxes with negative rates). [ citation needed ] Economic losses due to taxes have been evaluated to be as low as 2.5 cents per dollar of revenue, and as high as 30 cents per dollar of revenue (on average), and even much higher at the margins.
Where a tax increases linearly, the deadweight loss increases as the square of the tax increase. This means that when the size of a tax doubles, the base and height of the triangle double. Thus, doubling the tax increases the deadweight loss by a factor of 4. The varying deadweight loss from a tax also affects the government's total tax revenue.
In some cases, there is a unique utility-maximizing bundle for each price and income situation; then, (,) is a function and it is called the Marshallian demand function. If the consumer has strictly convex preferences and the prices of all goods are strictly positive, then there is a unique utility-maximizing bundle.
Taxation leads to a reduction in the economic well-being known as deadweight loss. This loss occurs because taxes create disincentives for production. The gap between taxed and the tax-free production is the deadweight loss. [4] Deadweight loss reduces both the consumer and producer surplus. [5] The magnitude of deadweight loss depends on the ...
In mainstream economics, economic surplus, also known as total welfare or total social welfare or Marshallian surplus (after Alfred Marshall), is either of two related quantities: Consumer surplus , or consumers' surplus , is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the ...
In reality, however, the net wage is the gross wage times one minus the tax rate, all divided by the price of consumption goods. With the status quo income tax, deadweight loss exists. Any addition to the price of consumption goods or an increase in the income tax extends the deadweight loss further.
Given that capital income is concentrated among high income earners, if the social welfare function is inequality averse, then the optimal capital tax may be arbitrarily close to 100%, as increases to the capital tax rate lowers inequality but imposes no deadweight loss; this is in contrast to the standard assumption in optimal labor tax ...
Deadweight loss and excess burden of taxation are synonyms closely related. I propose that we merge them. --Explodicle 16:36, 18 March 2008 (UTC) []We can not merge these two terms because while they "might" be closely related to one another, deadweight loss in this instance represents a general definition unlike excess burden of taxation which refers to a specific area (tax) reflecting the ...