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Ch12 Tax Efficiency (See Ch11) A Good Tax (Admin Efficient (Golden rule:…
Ch12 Tax Efficiency (See Ch11)
A Good Tax
Generate sufficient income
Economically Efficient
Excess burden of taxation
Most taxes places greater burden than necessary to generate revenue
Additional burden also called
Excess Burden
WelfareCosts
Deadweight Loss
Approaches
Indifference Curve approach (Fig12.1)
General taxes
Selective taxes
Tax Neutrality
Consumer Surplus approach (Fig 12.2)
Constant cost industry
Effect of elasticity
Effect of tax Rates
Admin Efficient
Golden rule: Simplified
Community's literacy
Withholding taxes at source
Community's willingness to pay
Will to enforce laws
Importance of transparency
Tax Avoidance: Legal
Tax Evasion: Illegal
Flexible
Taxes can influence economic activity
Should be flexible to Demand and Supply conditions
Auto-stabilizers should be built in
Equitable (See Ch11)
See Graphs on slides