EFFICIENT TAXATION OF MIXED PERSONAL AND BUSINESS EXPENSES

A mixed personal and business expenditure is efficient if its combined personal and business benefits exceed its costs. The ideal tax regime would encourage mixed expenditures that are efficient and discourage those that are inefficient. Tax scholars have noted that this result can be achieved by taxing the personal benefit produced by such an expenditure. It is often difficult, however, to determine the size of the personal benefit produced by a mixed expenditure. Efficient results can be achieved by taxing the excess of the cost of the expenditure over its business value or by taxing a portion of the cost of the expenditure equal to the percentage of the total value of the expenditure represented by its personal value.