Tax amount elasticity

The tax amount elasticity or revenue elasticity indicates by how many percent the tax amount changes if the tax base increases by one percent. ${\displaystyle \varepsilon }$

It is the ratio of the relative change in the control amount S = S (B) at a relative change of the tax base B .

${\displaystyle \varepsilon ={\frac {\frac {\mathrm {d} S}{\mathrm {d} B}}{\frac {S}{B}}}={\frac {\mathrm {d} S}{\mathrm {d} B}}\cdot {\frac {B}{S}}}$

This also corresponds to the quotient of the marginal tax rate and the average tax rate

${\displaystyle \varepsilon ={\frac {S'(B)}{{\bar {s}}(B)}}={\frac {\text{Grenzsteuersatz}}{\text{Durchschnittssteuersatz}}}}$

A tariff is

• elastic if ${\displaystyle \varepsilon >1}$
• incidence inelastic if ${\displaystyle \varepsilon <1}$

Progressive tariffs are elastic because here the marginal tax rate is higher than the average tax rate. Regressive tariffs are inelastic.

See also

• Tax amount function
• Residual income elasticity

Individual evidence

1. ^ Fundamentals of taxation, Silke Übelmesser, LMU Munich, SS 2010, slide 27