The deadweight loss from a tax is the reduction in producer and consumer surplus minus the tax revenue transferred to the government.

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The deadweight loss is the loss of economic efficiency that occurs when a tax is imposed, and it results from an inefficient allocation of resources. It is generally calculated as the difference between the amount that consumers and producers would have been willing to pay or receive and the amount they actually pay or receive after the tax is imposed. This reduction in producer and consumer surplus is not compensated by the tax revenue transferred to the government, which is why the deadweight loss is a net loss to society.

The Deadweight Loss from a Tax Is the Reduction in Producer