Popular Substitution Effects: Excess Burden Estimates for General Sales Taxes

Posted: 13 Feb 2003

See all articles by Richard R. Hawkins

Richard R. Hawkins

University of West Florida - Haas Center for Business Research and Economic Development

Abstract

In this paper, a partial equilibrium model is used to evaluate the efficiency of some popular sales tax structures, including structures with pyramiding from levies on production inputs. The results generally support expectations - inefficiency increases when retail exemptions are large and the general rate is high - but fall heavily on price-inelastic and exempt goods and actually improve tax efficiency. Second, equal-yield sales tax systems can have different median tax payments and a large majority of households may prefer exemptions and high rates.

Suggested Citation

Hawkins, Richard R., Popular Substitution Effects: Excess Burden Estimates for General Sales Taxes. National Tax Journal, Vol. 55, No. 4, December 2002. Available at SSRN: https://ssrn.com/abstract=368401

Richard R. Hawkins (Contact Author)

University of West Florida - Haas Center for Business Research and Economic Development ( email )

Pensacola, FL 32514
United States
(850) 474-2661 (Phone)

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