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Deadweight Loss

   Also found in: Acronyms, 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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Economists call this a deadweight loss, because people give up the taxed activity or good they prefer.
To do so, the public agency equates the marginal deadweight loss associated with [alpha] and [beta] while ensuring that revenues equal costs.
The Interstate Commerce Commission, for example (this is my example, not his), imposed billions of dollars of deadweight loss on the U.
 
 
 
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