Certain effects of random taxes

James Hines and Michael Keen

Journal of Public Economics, 2021, vol. 203, issue C

Abstract: This paper explores the implications of tax rate randomness, identifying circumstances in which revenue-neutral rate variability increases profitability, economic activity, and the efficiency of resource allocation. Furthermore, with heterogeneous taxpayers, tax rate variability is shown to perform an efficiency-enhancing screening function, imposing heavier expected tax burdens on less responsive taxpayers. And while efficient tax randomness enables governments to reduce average costs of taxation, it necessarily increases the marginal cost of taxation over some ranges of expected revenue, so may reduce efficient levels of government spending.

Keywords: Tax uncertainty; Random taxes; Tax variability; Deadweight loss (search for similar items in EconPapers)
JEL-codes: H21 H22 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272721000487
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Certain effects of random taxes (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:203:y:2021:i:c:s0047272721000487

DOI: 10.1016/j.jpubeco.2021.104412

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().