We present analytic formulas for calculating marginal welfare costs when taxes are levied against the wages of a heterogeneous population of households and marginal tax revenue finances either the supply of a public good or lump-sum transfers. The formulas are applied to explain the wide...

Almost all theoretical work on how to calculate the marginal deadweight loss has been done for linear taxes and for variations in linear budget constraints. This is quite surprising since most income tax systems are nonlinear, generating nonlinear budget constraints. Instead of developing the...