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Nice Guys Finish Last: Are People with Higher Tax Morale Taxed more Heavily?

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Author Info

  • Philipp Doerrenberg
  • Denvil Duncan
  • Clemens Fuest
  • Andreas Peichl

Abstract

This paper provides evidence of efficient taxation of groups with heterogeneous levels of ‘tax morale’. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that ‘nice guys finish last’: groups with higher tax morale will be taxed more heavily, simply because taxing them is less costly. Based on unique cross-country micro data and an IV approach to rule out reverse causality, we find empirical support for this hypothesis. Income groups with high tax morale systematically face higher average and marginal tax rates. To the best of our knowledge, this is the first paper to investigate whether differences in tax morale affect the distribution of the tax burden across different groups of taxpayers.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3858.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3858

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Keywords: tax morale; tax compliance; optimal taxation; political economy;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. We need more tax inspectors
    by Economic Logician in Economic Logic on 2012-04-13 14:53:00
  2. Why We Want a Complicated Tax System: So That People Can Avoid Taxes
    by Tim Worstall in Tim Worstall (Forbes) on 2012-04-14 14:26:18
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Philipp Doerrenberg & Denvil Duncan, 2012. "Experimental Evidence on the Relationship between Tax Evasion Opportunities and Labor Supply," Cologne Graduate School Working Paper Series 03-10, Cologne Graduate School in Management, Economics and Social Sciences.
  2. Andras Simonovits, 2011. "Higher tax morale implies a higher optimal income tax rate," IEHAS Discussion Papers 1137, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Andras Simonovits, 2013. "A family of simple paternalistic transfer models," IEHAS Discussion Papers 1324, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. Andras Simonovits, 2013. "Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 97-114, June.
  5. Hendel, Ulrich, 2012. "The Influence of Altruistic Preferences on the Race to the Bottom of Welfare States," Discussion Papers in Economics 13999, University of Munich, Department of Economics.

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