Working Paper: NBER ID: w4864
Authors: Enrique G. Mendoza; Assaf Razin; Linda L. Tesar
Abstract: This paper proposes a method for computing tax rates using national accounts and revenue statistics. Using this method we construct time-series of tax rates for large industrial countries. The method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases. This method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework. These tax rates compare favorably with existing estimates of marginal tax rates, and highlight important international differences in tax policy.
Keywords: effective tax rates; macroeconomics; cross-country estimates; factor incomes; consumption
JEL Codes: H21; H25; H87
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher capital income taxes (F38) | lower savings rates (D14) |
| higher capital income taxes (F38) | lower investment rates (G31) |
| higher labor income taxes (H31) | lower hours worked (J22) |
| effective tax rates (H29) | distorts economic decisions (H31) |