Is the taxable income elasticity sufficient to calculate deadweight loss?
Subtitle: the implications of evasion and avoidance
By: Raj Chetty.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13844; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13844.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Since Feldstein (1999), the most widely used method of calculating the excess burden of income taxation is to estimate the effect of tax rates on reported taxable income.  This paper reevaluates the taxable income elasticity as a measure of excess burden when individuals can evade or avoid taxes.  In many cases, part of the cost of evasion and avoidance reflects a transfer to another agent in the economy.  I show that in such situations, excess burden depends on a weighted average of the taxable income and total earned income elasticities, with the weight determined by the marginal resource cost of sheltering income from taxation.  This generalized formula implies that the efficiency cost of taxing high income individuals is not necessarily large despite evidence that their reported incomes are highly sensitive to tax rates"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/16/2008.

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