The excess burden of an income tax is a function of the _____.

Question

Quizplus · Accepted Answer

The excess burden, also known as the deadweight loss, of an income tax is a function of the marginal tax rate. This is because the marginal tax rate determines the incentive for individuals to work and earn income. As the marginal tax rate increases, the incentive to work decreases, leading to a reduction in economic activity and output, resulting in deadweight losses. Therefore, minimizing the excess burden means finding the optimal marginal tax rate.

The Excess Burden of an Income Tax Is a Function