Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods
The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure --...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100901082448 http://hdl.handle.net/10986/3895 |
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okr-10986-38952021-04-23T14:02:13Z Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods Anderson, James E. Martin, Will ACCOUNTING AGRICULTURE BENCHMARK BUDGET CONSTRAINT BUDGET CONSTRAINTS COMMODITIES COMMODITY COMPETITIVE MARKET CONSUMER DEMAND CONSUMER DEMANDS CONSUMERS COST OF FUNDS DECISION MAKING DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DIFFERENTIAL TAXATION DISPOSABLE INCOMES ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIC THEORY ECONOMICS ECONOMICS LITERATURE ELASTICITY EQUALIZATION EQUATIONS EXCISE TAXES EXCLUSION FISCAL BALANCE FISCAL POLICIES FISCAL POLICY GDP GOVERNMENT BUDGET GOVERNMENT DEFICIT GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GOVERNMENT POLICY GOVERNMENT REVENUE GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT HOLDING INCOME INCOME EFFECT INCOME TAX INCOME TAXES INEFFICIENCY INTERNATIONAL BANK INTERNATIONAL TRADE MARGINAL BENEFITS MARGINAL COST MARGINAL COSTS MARGINAL PRODUCTIVITY MARGINAL TAX RATES MARGINAL VALUE MARKET ENVIRONMENT MARKET PRICES MATHEMATICAL LOGIC NATIONAL BUDGET NATIONAL INCOME NORMAL GOOD OPEN ECONOMY OPTIMAL TAXATION OUTPUT OUTPUTS POLITICAL ECONOMY PRICE CHANGES PRIVATE GOODS PRIVATE SECTOR PRODUCTION EFFICIENCY PRODUCTION STRUCTURE PROGRESSIVE TAXATION PROGRESSIVE TAXES PUBLIC PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC FINANCE PUBLIC FUNDS PUBLIC GOOD PUBLIC GOODS PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF RETURN REAL INCOME RETURNS ROADS SHADOW PRICES SINGLE TAX SMALL ECONOMY SOCIAL COST SOCIAL COSTS SOCIAL MARGINAL COST TAX TAX AVOIDANCE TAX BASE TAX BASES TAX CHANGES TAX MEASURES TAX POLICY TAX RATE TAX RATES TAX REFORM TAX REFORMS TAX REVENUE TAX REVENUES TAXABLE INCOME TAXATION TAXPAYERS USER CHARGES VALUATION VALUATIONS WELFARE ECONOMICS The recent public economics literature involves an apparent consensus that income effects reduce the costs of raising revenues and hence increase the desirable level of public good provision. Higher taxes can indeed reduce the demand for leisure -- and hence increase the supply of taxed labor -- through income effects. However, the consensus is wrong because the income effects of taxes must be considered symmetrically with those from provision of public goods. This paper uses a model with multiple public goods and taxes to derive consistent measures of the marginal benefits of publicly-provided goods and their marginal social costs. With this model, the authors show that either compensated approaches excluding these income effects or uncompensated approaches including them may be used. If an uncompensated measure of the marginal cost of funds is used, however, the benefits of providing public goods should be adjusted with a simple, benefit multiplier not previously seen in the literature. Once this is done, the optimal level of public provision is independent of whether compensated or uncompensated approaches are used. Proper accounting for these income effects -- or their omission using a compensated approach -- appears to substantially raise the hurdle for government provision where there are substantial taxes bearing on labor. 2012-03-19T18:41:44Z 2012-03-19T18:41:44Z 2010-09-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100901082448 http://hdl.handle.net/10986/3895 English Policy Research working paper ; no. WPS 5410 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTING AGRICULTURE BENCHMARK BUDGET CONSTRAINT BUDGET CONSTRAINTS COMMODITIES COMMODITY COMPETITIVE MARKET CONSUMER DEMAND CONSUMER DEMANDS CONSUMERS COST OF FUNDS DECISION MAKING DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DIFFERENTIAL TAXATION DISPOSABLE INCOMES ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIC THEORY ECONOMICS ECONOMICS LITERATURE ELASTICITY EQUALIZATION EQUATIONS EXCISE TAXES EXCLUSION FISCAL BALANCE FISCAL POLICIES FISCAL POLICY GDP GOVERNMENT BUDGET GOVERNMENT DEFICIT GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GOVERNMENT POLICY GOVERNMENT REVENUE GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT HOLDING INCOME INCOME EFFECT INCOME TAX INCOME TAXES INEFFICIENCY INTERNATIONAL BANK INTERNATIONAL TRADE MARGINAL BENEFITS MARGINAL COST MARGINAL COSTS MARGINAL PRODUCTIVITY MARGINAL TAX RATES MARGINAL VALUE MARKET ENVIRONMENT MARKET PRICES MATHEMATICAL LOGIC NATIONAL BUDGET NATIONAL INCOME NORMAL GOOD OPEN ECONOMY OPTIMAL TAXATION OUTPUT OUTPUTS POLITICAL ECONOMY PRICE CHANGES PRIVATE GOODS PRIVATE SECTOR PRODUCTION EFFICIENCY PRODUCTION STRUCTURE PROGRESSIVE TAXATION PROGRESSIVE TAXES PUBLIC PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC FINANCE PUBLIC FUNDS PUBLIC GOOD PUBLIC GOODS PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF RETURN REAL INCOME RETURNS ROADS SHADOW PRICES SINGLE TAX SMALL ECONOMY SOCIAL COST SOCIAL COSTS SOCIAL MARGINAL COST TAX TAX AVOIDANCE TAX BASE TAX BASES TAX CHANGES TAX MEASURES TAX POLICY TAX RATE TAX RATES TAX REFORM TAX REFORMS TAX REVENUE TAX REVENUES TAXABLE INCOME TAXATION TAXPAYERS USER CHARGES VALUATION VALUATIONS WELFARE ECONOMICS |
| spellingShingle |
ACCOUNTING AGRICULTURE BENCHMARK BUDGET CONSTRAINT BUDGET CONSTRAINTS COMMODITIES COMMODITY COMPETITIVE MARKET CONSUMER DEMAND CONSUMER DEMANDS CONSUMERS COST OF FUNDS DECISION MAKING DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPMENT ECONOMICS DIFFERENTIAL TAXATION DISPOSABLE INCOMES ECONOMIC EFFICIENCY ECONOMIC PERFORMANCE ECONOMIC RESEARCH ECONOMIC THEORY ECONOMICS ECONOMICS LITERATURE ELASTICITY EQUALIZATION EQUATIONS EXCISE TAXES EXCLUSION FISCAL BALANCE FISCAL POLICIES FISCAL POLICY GDP GOVERNMENT BUDGET GOVERNMENT DEFICIT GOVERNMENT EXPENDITURE GOVERNMENT EXPENDITURES GOVERNMENT POLICY GOVERNMENT REVENUE GOVERNMENT REVENUES GOVERNMENT SPENDING GROSS DOMESTIC PRODUCT HOLDING INCOME INCOME EFFECT INCOME TAX INCOME TAXES INEFFICIENCY INTERNATIONAL BANK INTERNATIONAL TRADE MARGINAL BENEFITS MARGINAL COST MARGINAL COSTS MARGINAL PRODUCTIVITY MARGINAL TAX RATES MARGINAL VALUE MARKET ENVIRONMENT MARKET PRICES MATHEMATICAL LOGIC NATIONAL BUDGET NATIONAL INCOME NORMAL GOOD OPEN ECONOMY OPTIMAL TAXATION OUTPUT OUTPUTS POLITICAL ECONOMY PRICE CHANGES PRIVATE GOODS PRIVATE SECTOR PRODUCTION EFFICIENCY PRODUCTION STRUCTURE PROGRESSIVE TAXATION PROGRESSIVE TAXES PUBLIC PUBLIC ECONOMICS PUBLIC EXPENDITURE PUBLIC FINANCE PUBLIC FUNDS PUBLIC GOOD PUBLIC GOODS PUBLIC POLICY PUBLIC SECTOR PUBLIC SPENDING RATE OF RETURN REAL INCOME RETURNS ROADS SHADOW PRICES SINGLE TAX SMALL ECONOMY SOCIAL COST SOCIAL COSTS SOCIAL MARGINAL COST TAX TAX AVOIDANCE TAX BASE TAX BASES TAX CHANGES TAX MEASURES TAX POLICY TAX RATE TAX RATES TAX REFORM TAX REFORMS TAX REVENUE TAX REVENUES TAXABLE INCOME TAXATION TAXPAYERS USER CHARGES VALUATION VALUATIONS WELFARE ECONOMICS Anderson, James E. Martin, Will Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| geographic_facet |
The World Region The World Region |
| relation |
Policy Research working paper ; no. WPS 5410 |
| description |
The recent public economics literature
involves an apparent consensus that income effects reduce
the costs of raising revenues and hence increase the
desirable level of public good provision. Higher taxes can
indeed reduce the demand for leisure -- and hence increase
the supply of taxed labor -- through income effects.
However, the consensus is wrong because the income effects
of taxes must be considered symmetrically with those from
provision of public goods. This paper uses a model with
multiple public goods and taxes to derive consistent
measures of the marginal benefits of publicly-provided goods
and their marginal social costs. With this model, the
authors show that either compensated approaches excluding
these income effects or uncompensated approaches including
them may be used. If an uncompensated measure of the
marginal cost of funds is used, however, the benefits of
providing public goods should be adjusted with a simple,
benefit multiplier not previously seen in the literature.
Once this is done, the optimal level of public provision is
independent of whether compensated or uncompensated
approaches are used. Proper accounting for these income
effects -- or their omission using a compensated approach --
appears to substantially raise the hurdle for government
provision where there are substantial taxes bearing on labor. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Anderson, James E. Martin, Will |
| author_facet |
Anderson, James E. Martin, Will |
| author_sort |
Anderson, James E. |
| title |
Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| title_short |
Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| title_full |
Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| title_fullStr |
Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| title_full_unstemmed |
Costs of Taxation and Benefits of Public Goods with Multiple Taxes and Goods |
| title_sort |
costs of taxation and benefits of public goods with multiple taxes and goods |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100901082448 http://hdl.handle.net/10986/3895 |
| _version_ |
1764388896992395264 |