The Link of Tax Revenue and Overall Excess Burden

Abstract

The tax revenue is very important for society and government. However, the increasing tax revenue can cause an amount of excess burden. Overall excess burden may lead to welfare loss of society. Therefore, the quantity link of tax revenue and overall excess burden is crucial for policymaker. To explore the rule existed in the link of tax revenue and excess burden, this study develops algebraic and geometric methods to analyze the dynamic process of tax revenue and excess burden when the tax rate is changed in a specific and a general case. It is found that more tax revenues lead to more excess burden. The increasing rate of excess burden exceeds that of tax revenue.