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Measuring Effective Tax Rates in the Presence of Multiple Inputs: A Production Based Approach

Author

Listed:
  • Kenneth J. McKenzie

    (The University of Calgary)

  • Jack M. Mintz

    (University of Toronto)

  • Kimberly A. Scharf

    (University of Warwick)

Abstract

We suggest a new method for comparing tax regimes across jurisdictions. The approach aggregates taxes on inputs by focussing on production, rather than investment, decisions. Taxes on various inputs affect production decisions by increasing marginal costs. By calculating the difference between the tax-inclusive and tax-exclusive marginal cost of production, we determine the effective excise tax rate on marginal costs implied by all of the various taxes imposed upon the firm’s inputs. The effective tax rate on marginal costs provides a convenient summary measure of the potential impact of taxes on all inputs on production location decisions.

Suggested Citation

  • Kenneth J. McKenzie & Jack M. Mintz & Kimberly A. Scharf, 1997. "Measuring Effective Tax Rates in the Presence of Multiple Inputs: A Production Based Approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 337-359, July.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:d:10.1023_a:1008620522432
    DOI: 10.1023/A:1008620522432
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    References listed on IDEAS

    as
    1. King, Mervyn A. & Fullerton, Don, 2010. "The Taxation of Income from Capital," National Bureau of Economic Research Books, University of Chicago Press, number 9780226436319, April.
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