Ch11 TAXATION, PRICES, EFFICIENCY, AND THE DISTRIBUTION OF INCOME（课件）- 《财政金融英文版》同步教学（人民大学版）

TAXATION, PRICES, EFFICIENCY, AND THE DISTRIBUTION OF INCOME C h a p t e r 11 Lump-Sum Taxes Fixed sum that a person would pay per year, independent of that person’s income, consumption of goods and services, or wealth Do not prevent prices from equaling marginal social cost and benefit of any goods or services Reduce ability of consumers to purchase market goods and services and to save Head tax is a lump-sum tax that would require all adults to pay an equal amount each year to governing authorities. Price-Distorting Tax One that causes net price received by sellers of a good or service to diverge from gross price paid by buyers Individual excess burden of a tax measures the loss in well-being to a taxpayer caused by the substitution effect of a price-distorting tax. Indifference curve analysis can be used to compare effects of lump-sum and price-distorting tax, each collecting the same amount. Price-Distorting Versus Lump-Sum Tax Unit Tax A levy of a fixed amount per unit of a good exchanged in a market Tax is independent of price, so if price rises, no more revenue would be collected per unit Sellers must cover the tax to avoid losses Effect is equivalent to an increase in marginal cost to sellers that decreases supply Unit Tax Excess Burden of a Tax Tax prevents market interaction among buyers and sellers from automatically equating MSC and MSB, required to attain efficiency Total excess burden of a tax is additional cost to society over amount of dollars paid in a tax Total excess burden of a unit tax is loss in well-being to buyers and sellers over what they would suffer under a lump-sum tax Formula for excess burden of a unit tax: Excess Burden of a Tax With perfectly inelastic demand, the tax causes price to rise, but because quantity demanded is not reduced, change in output is zero and excess burden is zero: Excess Burden of a Tax With perfectly inelastic supply, sellers suffer a net reduction in price, so net revenue falls, but does not alter quantity