Overall Excess Burden Minimization from a Mathematical Perspective

Abstract

The principle of overall excess burden minimization is an important part in the field of public finance, and the authors of most public finance textbooks do not offer a rigorous mathematical proof. To prove this principle, this study develops algebraic and geometric methods to examine the links between tax revenue and excess burden in a general case and further analyzes the dynamic process of tax revenue and excess burden when the tax rate is changed. Finally, the optimal overall excess burden minimization is demonstrated to verify the principle in terms of the concavity of the excess burden curve.