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Deadweight Loss
(redirected from Dead-weight loss)

   Also found in: Wikipedia 0.01 sec.
Deadweight Loss
The loss of economic activity due to excessive taxation. For example, suppose a person on welfare is offered a job that pays more than he/she receives in welfare benefits. If taxes are too high, however, the person may find that his/her aftertax income is in fact lower than what he/she was receiving on welfare. The person might then rationally decide to stay on welfare. The deadweight loss is both the cost of keeping that person on welfare and the loss incurred from the economy at large from losing that person's production. It is also called the excess burden of taxation.


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These losses are what economists call a dead-weight loss or welfare loss to society.
PROPOSITION 2 The dead-weight loss effected by the mandatory resale-royalty statute implies that the welfare-distributive effects of the statute are the opposite of those claimed for it by its supporters.
Under conservative assumptions, Feldstein estimates that the Social Security tax creates a dead-weight loss of about 20 percent of Social Security revenues ($67 billion dollars in 1995).
 
 
 
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