A Note on Cost‐Benefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes

Johansson, Per-Olov; Kriström, Bengt

doi:10.2139/ssrn.1586270

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A Note on Cost‐Benefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes

CERE

April 8, 2010

CERE Working Paper No. 2010:5

Abstract:
In this note we discuss how to treat taxes in a cost-benefit analysis (CBA). In particular we relate the shadow price of taxes in CBA to the concepts the marginal cost of public funds MCPF) and the marginal excess burden (MEB) of taxes. In particular we demonstrate that the MCPF is equal to one plus the MEB for a marginal increase in a distortionary tax.

Number of Pages in PDF File: 15

Keywords: Cost-benefit analysis, marginal cost of public funds, excess burden, taxation

JEL Classification: H21, H41, H43, Q51

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Date posted: April 12, 2010

Suggested Citation

Johansson, Per-Olov and Kriström, Bengt, A Note on Cost‐Benefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes (April 8, 2010). CERE Working Paper No. 2010:5. Available at SSRN: http://ssrn.com/abstract=1586270 or http://dx.doi.org/10.2139/ssrn.1586270

Contact Information

Per-Olov Johansson (Contact Author) Stockholm School of Economics ( email ) P.O. Box 6501 Stockholm SWEDEN +46 8 736 92 82 (Phone) +46 8 30 21 15 (Fax)
Bengt Kriström CERE ( email ) S-901 83 Umea Sweden +46-(0)90-7865219 (Phone)

Abstract

References (15)

A Note on Cost‐Benefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes

Per-Olov Johansson

Bengt Kriström

Date posted: April 12, 2010

Suggested Citation

Contact Information

Per-Olov Johansson (Contact Author)

Bengt Kriström