Is the Taxable Income Elasticity Su ¢ cient to Calculate Deadweight Loss ? The Implications of Evasion and Avoidance

@inproceedings{Chetty2008IsTT,
  title={Is the Taxable Income Elasticity Su ¢ cient to Calculate Deadweight Loss ? The Implications of Evasion and Avoidance},
  author={Raj Chetty},
  year={2008}
}
Since Feldstein (1999), the most widely used method of calculating the excess burden of income taxation is to estimate the e¤ect of tax rates on reported taxable income. Feldstein’s taxable income formula for deadweight loss implicitly assumes that the marginal social cost of evasion and avoidance equals the tax rate. This paper argues that this condition is likely to be violated in practice for two reasons. First, some of the costs of evasion and avoidance are transfers to other agents in the… CONTINUE READING

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