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Taxes. Taxes are often levied on good things like working or investing, we get less of them. Creates dead weight losses. Tax wedges. The calculation of deadweight losses is central to a number of policy questions including: .
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Taxes Taxes are often levied on good things like working or investing, we get less of them. Creates dead weight losses.
The calculation of deadweight losses is central to a number of policy questions including: • which tax measures impose the least burdens or costs on the community to finance a public program or project? • how valuable do public projects have to be to cover the full costs of the revenue needed to finance them? and • how much redistribution from rich to poor can society afford?
How Much? • Studies have typically found that the deadweight losses associated with raising taxation revenue range from a minimum of 10 cents for each additional dollar of revenue raised to well in excess of $1 for each additional dollar of revenue raised.
Depends on? • The size of deadweight losses is influenced by a range of factors but deadweight losses are likely to be greatest where the actions of producers and consumers are highly responsive to after-tax prices, where existing marginal tax rates are high and where savings are highly responsive to after-tax returns.
