The Generalized Excess Burden of Taxation

Abstract

A generalized measure of the excess burden of a tax system is proposed which integrates the distribution of taxes, along with standard efficiency and compliance costs, as a source of excess burden. In the absence of compliance and efficiency costs, the generalized excess burden measures the excess burden of regressive taxation, and provides a useful index for ranking the regressivity of different tax systems. Data from standard tax incidence studies are used to calculate and illustrate the generalized excess burden. Also, illustrative calculations of the generalized excess burden where taxes distort the choice between goods and leisure demonstrate the usefulness of the proposed measure.