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Tax Multiplier Calculator

LAST UPDATE: June 20th, 2018

Tax Multiplier Calculator (Simple)

Tax Multiplier Calculator (Complex)

What is the tax multiplier?

The tax multiplier calculates the amount that a decrease in taxes will generate in the economy.

A higher tax multiplier means that more economic activity will be created, a lower tax multiplier means that less economic activity will be generated.

Formula (simple)

\text{Tax Multiplier} = \frac{\text{MPC}}{1 - \text{MPC}}

Where MPC = Marginal Propensity to Consume

Formula (complex)

\text{Tax Multiplier} = \frac{\text{MPC}}{1 - \text{MPC}\times(1 - \text{MPT} + \text{MPI} + \text{MPG} + \text{MPM}}

Where:

  • MPC = Marginal Propensity to Consume
  • MPT = Marginal Propensity to Tax
  • MPI = Marginal Propensity to Invest
  • MPG = Marginal Propensity of Government Expenditures
  • MPM = Marginal Propensity to Import

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