Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205704
Authors: 
Creedy, John
Mok, Penny
Year of Publication: 
2017
Series/Report no.: 
New Zealand Treasury Working Paper No. 17/01
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
The present paper reports estimates of welfare changes and the marginal welfare cost of income taxation for a wide range of income and demographic groups in New Zealand, in the context of a uniform increase in all marginal income tax rates. The results are obtained using enhancements to the NZ Treasury's behavioural microsimulation model, Taxwell-B, which uses discrete hours modelling to examine the labour supply responses of all individuals to an income tax change. Considerable variation is found in the marginal welfare costs for different groups, with an overall value of 12 cents per extra dollar raised. The paper also demonstrates the use of a money metric utility measure in a social welfare function evaluation. A smaller reduction in ‘social welfare' is obtained compared with the use of net incomes.
Subjects: 
Direct taxation
excess burden
marginal welfare cost
welfare measurement
JEL: 
H20
H31
I30
D63
ISBN: 
978-1-988534-13-8
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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