Lockwood, Ben (2020) Malas notches. International Tax and Public Finance, 27 . pp. 779-804. doi:10.1007/s10797-020-09589-3 ISSN 0927-5940.
Preview |
PDF
WRAP-Malas-notches-Lockwood-2020.pdf - Published Version - Requires a PDF viewer. Available under License Creative Commons Attribution 4.0. Download (2MB) | Preview |
![[thumbnail of WRAP-Malas-notches-Lockwood-2020.pdf]](https://wrap.warwick.ac.uk/style/images/fileicons/application_pdf.png) |
PDF
WRAP-Malas-notches-Lockwood-2020.pdf - Accepted Version Embargoed item. Restricted access to Repository staff only - Requires a PDF viewer. Download (1MB) |
Abstract
This paper shows that the sufficient statistic approach to the welfare properties of income (and other) taxes does not easily extend to tax systems with notches, because with notches, changes in bunching induced by changes in tax rates have a first-order effect on tax revenues. In an income tax setting, we show that the marginal excess burden (MEB) of a change in the top rate of tax is given by the Feldstein (Rev Econ Stat 81(4):674–680, 1999) formula for the MEB of a proportional tax, plus a correction term. This formula applies even if there is tax evasion. These correction terms cannot be calculated just from knowledge of the elasticity of taxable income, and quantitatively, they can be large. An application to VAT is discussed; with a calibration to UK data, the MEB of the VAT is roughly three times what it would be if VAT was simply a proportional tax.
| Item Type: | Journal Article |
|---|---|
| Subjects: | K Law [Moys] > KM Common Law, Public Law |
| Divisions: | Faculty of Social Sciences > Economics |
| Library of Congress Subject Headings (LCSH): | Taxation -- Great Britain, Finance, Public, Income tax, Income distribution -- Statistics |
| Journal or Publication Title: | International Tax and Public Finance |
| Publisher: | Springer New York LLC |
| ISSN: | 0927-5940 |
| Official Date: | August 2020 |
| Dates: | Date Event August 2020 Published 10 February 2020 Available 21 January 2020 Accepted |
| Volume: | 27 |
| Page Range: | pp. 779-804 |
| DOI: | 10.1007/s10797-020-09589-3 |
| Status: | Peer Reviewed |
| Publication Status: | Published |
| Re-use Statement: | This is a post-peer-review, pre-copyedit version of an article published in International Tax and Public Finance. The final authenticated version is available online at: https://doi.org/10.1007/s10797-020-09589-3 |
| Access rights to Published version: | Open Access (Creative Commons open licence) |
| Date of first compliant deposit: | 23 January 2020 |
| Date of first compliant Open Access: | 4 June 2020 |
| Related URLs: | |
| URI: | https://wrap.warwick.ac.uk/132296/ |
Request changes or add full text files to a record
Repository staff actions (login required)
 |
View Item |