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

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  • Kenneth McKenzie
  • Jack Mintz
  • Kimberly Scharf

Abstract

We suggest a new method for comparing tax regimes acrossjurisdictions. The approach aggregates taxes on inputs by focussingon production, rather than investment, decisions. Taxes on variousinputs affect production decisions by increasing marginal costs.By calculating the difference between the tax-inclusive and tax-exclusivemarginal cost of production, we determine the effective excisetax rate on marginal costs implied by all of the various taxesimposed upon the firm‘s inputs. The effective tax rate on marginalcosts provides a convenient summary measure of the potentialimpact of taxes on all inputs on production location decisions. Copyright Kluwer Academic Publishers 1997

Suggested Citation

  • Kenneth McKenzie & Jack Mintz & Kimberly 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:p:337-359
    DOI: 10.1023/A:1008620522432
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    References listed on IDEAS

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    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, October.
    2. Jack M. Mintz & Douglas D. Purvis, 1987. "Taxation and Business Activity: A Survey," Working Paper 696, Economics Department, Queen's University.
    3. Kenneth J. McKenzie, 1994. "The Implications of Risk and Irreversibility for the Measurement of Marginal Effective Tax Rates on Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 27(3), pages 604-619, August.
    4. Mervyn A. King & Don Fullerton, 1984. "The United Kingdom," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 31-86, National Bureau of Economic Research, Inc.
    5. Mervyn A. King & Don Fullerton, 1984. "Introduction to "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany"," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 1-6, National Bureau of Economic Research, Inc.
    6. Mervyn A. King & Don Fullerton, 1984. "The United States," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 193-267, National Bureau of Economic Research, Inc.
    7. Alan J. Auerbach, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 433-446.
    8. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1, June.
    9. Robin Boadway & Neil Bruce & Jack Mintz, 1984. "Taxation, Inflation, and the Effective Marginal Tax Rate on Capital in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 17(1), pages 62-79, February.
    10. Chun-Yan Kuo & Thomas Mcgirr & Satya Poddar, 1988. "Measuring the Non-Neutralities of Sales and Excise Taxes in Canada," Development Discussion Papers 1988-08, JDI Executive Programs.
    11. R. W. Boadway & N. Bruce & J. Mintz, 1982. "Corporate Taxation and the Cost of Holding Inventories," Canadian Journal of Economics, Canadian Economics Association, vol. 15(2), pages 278-293, May.
    12. Wilton, D & Prescott, D., 1993. "The Effects of Tax Increases on Wage and Labour Costs," Papers 93-29, Queen's at Kingston - School of Policy Studies.
    13. Gérard, Marcel & Beauchot, Laurence & Jamaels, Sylvie & Valenduc, Christian, 1997. "MESC (Marginal Effective Statutory Charge), an extension of King-Fullerton methodology," Discussion Papers, Series II 353, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    14. John B. Shoven & John Whalley, 1992. "Canada-U.S. Tax Comparisons," NBER Books, National Bureau of Economic Research, Inc, number shov92-1, June.
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