Tax structure efficiency: Introducing a new index.

• We develop an index measuring the efficiency of the tax structure. • The TSE (Tax Structure Efficiency) index is based on the marginal excess burden. • We validate the index following two accepted models, using the OECD data. • The perceived tax burden can be controlled by broadening the tax base. Identifying the impact of tax structures on economic growth is crucial to those who create tax policies. In this article, we create a tool called Tax Structure Efficiency Index that is based on the level of the tax system's concentration for assessing the tax structure's efficiency. We validate the measure by using the findings of two existing models—those of Arnold at el. and Lee and Gordon–that analyze the impact of different tax structures on economic growth. Our results accord with the findings of both previous studies and provide an explanation for them–the concentration of the tax structure affects economic growth through the excess burden. We also find that the perceived tax burden can be controlled by broadening the tax base, which can be measured by the TSE index. Those who create tax policies can use our simple measurement tool to design a tax structure that might lower the perceived tax and excess burdens and improve a country's long-term growth. [ABSTRACT FROM AUTHOR]