Scholarly Comments on Academic Economics

Saying Too Little, Too Late: Public Finance Textbooks and the Excess Burdens of Taxation

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Abstract

Taxation has several significant excess burdens, including enforcement costs, compliance costs, and deadweight losses. Most estimates find that raising a dollar of tax revenue costs much more than a dollar. Unfortunately, commonly used public finance textbooks do not integrate these costs into discussions of public goods or cost-benefit analyses. Not including these costs means that the optimal levels of public goods will be overestimated. Textbooks say too little, too late about the excess burdens of taxation. They could easily introduce excess burdens early, represent them in public goods diagrams, and integrate them throughout public finance instruction.

Podcast related to this article: John Horowitz on Public Finance and the Welfare Costs of Taxation (EJW Audio, September 2014).

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Volume (Issue)
Pages
277-296
Published
JEL classification
A2, H2, H4
Keywords
excess burden of taxation, compliance costs, administrative costs, economic education, public finance, deadweight loss, welfare cost
Downloads
5,553 article downloads
1,777 complete issue downloads
Total: 7,330

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