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CERE - the Center for Environmental and Resource Economics CERE Working Papers, CERE - the Center for Environmental and Resource Economics

No 2010:5:
A note on CostBenefit Analysis, the Marginal Cost of Public Funds, and the Marginal Excess Burden of Taxes

Per-Olov Johansson () and Bengt Kriström ()

Abstract: In this note we discuss how to treat taxes in a cost-benefit analysis (CBA). In particular we relate the shadow price of taxes in CBA to the concepts the marginal cost of public funds MCPF) and the marginal excess burden (MEB) of taxes. In particular we demonstrate that the MCPF is equal to one plus the MEB for a marginal increase in a distortionary tax.

Keywords: Cost-benefit analysis; marginal cost of public funds; excess burden; taxation; (follow links to similar papers)

JEL-Codes: H21; H41; H43; Q51; (follow links to similar papers)

15 pages, March 30, 2010

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