1. Chapter 16
Efficient and Equitable taxation

15. Ramsey Rule
Says that to minimize total excess burden, tax rates should be set so that the percentage reduction in the quantity demanded of each commodity is the same.
To minimize overall excess burden, the marginal excess burden of the last dollar raised should be same for each commodity
-otherwise raise revenues from commodity with lower marginal excess burden
Also DWL increases with higher t

17. A Reinterpretation of the Ramsey Rule
inverse elasticity rule

18. Efficiency Implications balancing factors
Elasticity rule: Highly elastic goods taxed at low rates, low elasticity goods at high rates
Broad base rule:better to tax wide variety of goods at moderate rates than a few at high rates

26. Costs of Running the Tax System
Costs of administering the income tax in the U.S.
Types of costs
Compliance
Administration
These issues affect base, rates, levels of evasion

27. Tax Evasion Evasion versus Avoidance
Policy Perspective: Architectural Tax Avoidance
Methods of tax evasion
Keeping two sets of books
Moonlight for cash
Barter
Deal in cash

28. Positive Analysis of Tax Evasion
MC = p * marginal penalty
MC = p * marginal penalty $ $
MB = t
MB = t R*
(Dollars of underreporting)
R* = 0
(Dollars of underreporting)