Final Topics - After MT3 Taxes Trade Taxes Tax base, tax...

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Unformatted text preview: After MT3 Taxes Trade Taxes Tax base, tax rate structure Taxes on stocks vs. taxes on flows (most taxes are on flows income, sales, etc) Progressive, regressive, proportional taxes. Marginal vs. average tax rate. Tax incidence: who pays the tax? Burden of a tax: taxes cause deadweight loss or burden because they distort peoples behavior. Taxes usually move us away from efficiency. Taxes move us toward efficiency if there is a negative externality. Neutrality more neutral taxes create less distortion and are better. S t S D S t S D Effects of price elasticity of D on tax incidence 3 $0.20 Tax Price per ounce $1.15 1.00 0.95 Millions of ounces per day 10 9 $0.20 Tax 10 7 Price per ounce $1.05 1.00 0.85 (a) Less elastic demand (b) More elastic demand The more elastic the D curve, the more tax is paid by producers (lower net-of-tax receipt) Effects of price elasticity of S on tax incidence 4 S t S D $0.20 Tax$0....
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Final Topics - After MT3 Taxes Trade Taxes Tax base, tax...

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