Document Type
Article
Publication Date
2021
Abstract
This paper explores the implications of tax rate randomness, identifying circumstances in which revenue-neutral rate variability increases profitability, economic activity, and the efficiency of resource allocation. Furthermore, with heterogeneous taxpayers, tax rate variability is shown to perform an efficiency-enhancing screening function, imposing heavier expected tax burdens on less responsive taxpayers. And while efficient tax randomness enables governments to reduce average costs of taxation, it necessarily increases the marginal cost of taxation over some ranges of expected revenue, so may reduce efficient levels of government spending.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Hines, James R., Jr. and Michael J. Keen. "Certain Effects of Random Taxes." Journal of Public Economics 203 (2021).
Comments
© 2021. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/ DOI: https://doi.org/10.1016/j.jpubeco.2021.104412