The Costs of Taxation and the Marginal Efficiency Cost of Funds

Joel Slemrod and Shlomo Yitzhaki

IMF Staff Papers, 1996, vol. 43, issue 1, 172-198

Abstract: It is argued that taxation causes deadweight losses--from substitution, evasion, and avoidance activities--and direct, administrative and compliance, costs. Some of these social costs tend to be discontinuous and/or nonconvex. Because most models of taxation ignore some components of the social costs of taxation, their conclusions cannot be considered all-encompassing. An alternative approach to policy evaluation is to rely on a marginal efficiency cost of funds rule that can indicate appropriate directions of reforms. The paper discusses the merits, applicability, and limitation of this rule, as well as its relationship to other concepts.

JEL-codes: H20 H21 H26 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (52)

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