Taxation and Excess Burden: A Life-Cycle Perspective / E. John Driffill, Harvey S. Rosen.

Format:

Book

Author/Creator:

Driffill, E. John.

Contributor:

National Bureau of Economic Research.

Rosen, Harvey S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0698.

NBER working paper series no. w0698

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Taxation and Excess Burden

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

Summary:

A lifetime perspective is appropriate in assessing the welfare implications of government tax policies. Although a number of attempts have been made to ex- amine the excess burden of taxation in life-cycle models, these have tended to ignore the role of human capital accumulation and/or the leisure-income choice. In this paper, we do numerical simulations with a model that takes both of these phenomena into account. We find that under reasonable assumptions, the failure to take into account distortions of human capital decisions produces substantial underestimates of the excess burden of income taxation. In addition, allowing for the endogeneity of human capital increases the efficiency of a personal consumption tax relative to that of an equal yield income tax.

Notes:

Print version record

June 1981.