Procedurally Fair Taxation
AbstractWe study the implications of procedural fairness on income taxation. We formulateprocedural fairness as a particular non-cooperative bargaining game and examine thestationary subgame perfect equilibria of the game. The equilibrium outcome is called tax equilibrium and is shown to be unique. The procedurally fair tax rate is defined as the tax rate that results in the limit of tax equilibria when the probability that negotiations break down converges to zero. The procedurally fair tax rate is shown to be unique. We also provide a characterization of the procedurally fair tax rate that involves the probability mass of below average income citizens and a particular measure of the citizens'' boldness. This characterization is then used to show that in a number of interesting cases the procedurally fair tax rate equals the probability mass of below average income citizens.
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Bibliographic InfoPaper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 024.
Date of creation: 2011
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Web page: http://www.maastrichtuniversity.nl/web/UMPublications.htm
public economics ;
Other versions of this item:
- NEP-ACC-2011-04-16 (Accounting & Auditing)
- NEP-ALL-2011-04-16 (All new papers)
- NEP-GTH-2011-04-16 (Game Theory)
- NEP-PUB-2011-04-16 (Public Finance)
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