MEASURING THE TAX BURDEN ON CAPITAL AND LABOR

A guide to current approaches to measuring the effective tax rate, with case studies that illustrate the different methods discussed.

Today's highly complicated tax codes have led economists and policy makers depend on simplified summary measures in order to understand how taxes affect the economy. Studies of the effective tax rate—that is, a measurement of the net amount of tax levied on certain economic activities—provide this sort of descriptive summary. Using estimates of effective tax rates, economists can look for evidence of economic behavior under different tax laws and policy makers can evaluate whether the net outcome is in accord with their intentions. Globalization, with its accompanying international mobility of capital and labor, has created a new use for estimates of the effective tax rate as policy makers seek to compare tax burdens in one country with those in another.This book provides an overview of the most important methods currently used to measure effective tax rates, highlighting the advantages and disadvantages of the different approaches and illustrating their use with specific case studies. The contributors, all noted international economists and seasoned policy makers, consider such topics as a new method to measure the effective tax rate on investment, the tax burden on cross-border investment, effective tax rates on human capital, the "Taxing Wages" approach, and measurement at the macro and micro levels.

"The papers in this book provide clear and compelling theory and evidence about the many concepts of 'effective tax rate' on physical capital, human capital, and labor. Since each measure is designed to address a different policy problem, this book provides important new answers to the twenty-year-old question: Which effective tax rate?" --Don Fullerton, Department of Economics, University of Texas

"Designing measures to capture the effects of taxation on the economy is no easy task, but it is highly relevant for empirical research on growth and employment, and for policy-making. This book, with essays by well-known experts in this field, is an enlightening read and strikes the right balance between theoretical and empirical considerations." --Willi Leibfritz, Economics Department, Organisation for Economic Cooperation and Development, Paris