Translate 
Abstract
ABSTRACT In recent years, Congressional bills have been proposed that would triple the federal tax rate on firearms from 10 to 30%, and raise the tax rate on semi-automatic rifles to 1,000%. Excessive taxes, however, can become counterproductive by reducing sales so much that tax revenues decline, and/or driving sales underground, where they are neither regulated nor taxed. Neither the maximization of tax revenue nor the threshold at which legal sales are replaced by illegal sales has previously been studied in the American firearms market. Using recent empirical estimates of the price elasticities of supply and demand for guns, this paper estimates the tax rates that would maximize federal revenue. Additionally, we develop a new model of tax tolerance and calibrate it using estimates of preference differentials and legal/illegal price ratios, to estimate the tax rates that would minimize legal sales without incentivizing illegal transactions.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call