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How Big Should Government Be?

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  • Feldstein, Martin

Abstract

Suggests that the deadweight burden caused by a tax rate increase depends not only on labor force participation response but also on other dimensions of labor supply (the forms in which compensation is paid; the forms of tax-favored consumption; and intertemporal allocation of consumption.) Recent econometric work implies that the deadweight burden caused by incremental taxation (the marginal excess burden) may exceed one dollar per dollar of revenue raised, making the cost of incremental government spending more than two dollars for each dollar of government spending.

Suggested Citation

  • Feldstein, Martin, 1997. "How Big Should Government Be?," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(2), pages 197-213, June.
    • Handle: RePEc:ntj:journl:v:50:y:1997:i:2:p:197-213
    DOI: 10.1086/NTJ41789253
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    1. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
    2. Martin Feldstein, 1978. "The Welfare Cost of Capital Income Taxation," NBER Chapters, in: Research in Taxation, pages 29-51, National Bureau of Economic Research, Inc.
    3. Joel Slemrod & Shlomo Yitzhaki, 1996. "The Costs of Taxation and the Marginal Efficiency Cost of Funds," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 172-198, March.
    4. Lindsey, Lawrence B., 1987. "Individual taxpayer response to tax cuts: 1982-1984 : With implications for the revenue maximizing tax rate," Journal of Public Economics, Elsevier, vol. 33(2), pages 173-206, July.
    5. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
    6. James M. Poterba & Andrew A. Samwick, 1995. "Stock Ownership Patterns, Stock Market Fluctuations, and Consumption," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 295-372.
    7. Martin Feldstein, 1995. "The Effects of Tax-Based Saving Incentives on Government Revenue and National Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 475-494.
    8. Auerbach, Alan J, 1995. "Tax Projections and the Budget: Lessons from the 1980's," American Economic Review, American Economic Association, vol. 85(2), pages 165-169, May.
    9. Alan J. Auerbach, 1996. "Dynamic Revenue Estimation," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 141-157, Winter.
    10. Mr. Joel Slemrod & Shlomo Yitzhaki, 1995. "The Costs of Taxation and the Marginal Cost of Funds," IMF Working Papers 1995/083, International Monetary Fund.
    11. Arnold Harberger, 1964. "Taxation, Resource Allocation, and Welfare," NBER Chapters, in: The Role of Direct and Indirect Taxes in the Federal Reserve System, pages 25-80, National Bureau of Economic Research, Inc.
    12. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-138, March.
    13. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-362, June.
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    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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