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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

    (CGS, University of Cologne)

  • Denvil Duncan

    (Indiana University)

  • Clemens Fuest

    ()
    (University of Oxford)

  • Andreas Peichl

    (IZA, University of Cologne, ISER and CESifo)

Abstract

This paper is the first to provide 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 Cologne Graduate School in Management, Economics and Social Sciences in its series Cologne Graduate School Working Paper Series with number 03-02.

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Date of creation: 06 Jan 2012
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Handle: RePEc:cgr:cgsser:03-02

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

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References

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Citations

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
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Cited by:
  1. 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.
  2. Doerrenberg, Philipp & Duncan, Denvil, 2012. "Experimental Evidence on the Relationship between Tax Evasion Opportunities and Labor Supply," IZA Discussion Papers 6914, Institute for the Study of Labor (IZA).
  3. Andras Simonovits, 2012. "Does higher tax morale imply higher optimal labor income tax rate?," IEHAS Discussion Papers 1218, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  4. 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.
  5. 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.

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