Policy Exchange

This report examines the effect of various different types of tax on economic growth and employment. The tax system may thereby distort the choices between work and leisure, consumption and savings, and domestic and foreign investment. These tax-induced distortions impede efficient allocation of resources across the economy and lead to a cost over and above the revenue collected. Not only does the tax present a cost to the taxpayer, it also creates an additional welfare loss. Some taxes may create bigger distortions and deadweight costs than others.