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Tax Morale and Optimal Taxation

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Author Info
Werner Güth ()
Rupert Sausgruber ()

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Abstract

We study experimentally how taxpayers choose between two tax regimes to fund a public good. The first-best tax regime imposes a general, distortion-free income tax. However, this tax cannot be enforced. The second-best alternative supplements the income tax by a specific commodity tax. This tax cannot be evaded but distorts optimal consumption choices, instead. The result is that a large majority of subjects prefer the general income tax regime. The bulk of votes is consistent with actual payoffs. We isolate tax morale as cause for payoffs above theoretical predictions.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1284.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1284

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Related research
Keywords: optimal taxation; tax evasion; voting; experiments;

Other versions of this item:

Find related papers by JEL classification:
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Creedy, John, 2000. "Measuring Welfare Changes and the Excess Burden of Taxation," Bulletin of Economic Research, Blackwell Publishing, vol. 52(1), pages 1-47, January.
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  2. Aradhna Krishna & Joel Slemrod, 2003. "Behavioral Public Finance: Tax Design as Price Presentation," Asia-Pacific Financial Markets, Springer, vol. 10(2), pages 189-203, March. [Downloadable!] (restricted)
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  3. Lars Feld & Jean-Robert Tyran, 2002. "Why People Obey the Law: Experimental Evidence from the Provision of Public Goods," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA). [Downloadable!]
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  5. Tyran, Jean-Robert & Sausgruber, Rupert, 2006. "A little fairness may induce a lot of redistribution in democracy," European Economic Review, Elsevier, vol. 50(2), pages 469-485, February. [Downloadable!] (restricted)
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  6. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series 1042, Department of Economics, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
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  7. Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0106, Department of Economics, Tufts University. [Downloadable!]
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  8. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-78, Winter. [Downloadable!] (restricted)
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  9. Timothy Besley & Ian Preston & Michael Ridge, 1993. "Fiscal Anarchy in the U.K.: Modelling Poll Tax Noncompliance," NBER Working Papers 4498, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June. [Downloadable!] (restricted)
  11. repec:att:wimass:199610 is not listed on IDEAS
  12. repec:cup:cbooks:9780521891073 is not listed on IDEAS
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  14. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Blackwell Publishing, vol. 68(1), pages 205-29, January.
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  15. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December. [Downloadable!] (restricted)
  16. Alm, James & McClelland, Gary H & Schulze, William D, 1999. "Changing the Social Norm of Tax Compliance by Voting," Kyklos, Blackwell Publishing, vol. 52(2), pages 141-71.
  17. Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June. [Downloadable!] (restricted)
  18. Wolfram Richter & Robin Boadway, 2001. "Trading Off Tax Distortion and Tax Evasion," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  19. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Ullmann & Christoph Watrin, 2008. "Comparing Direct and Indirect Taxation: The Influence of Framing on Tax Compliance," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 23-56, June. [Downloadable!]
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