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Tax Morale and Optimal Taxation

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  • Werner Gueth

    ()

  • Rupert Sausgruber

Abstract

We study experimentally how taxpayers choose between two tax regimes to fund a public good. The first-best tax regime imposes a general, distorsion-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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Bibliographic Info

Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-12.

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Length: 23 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:esi:discus:2004-12

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Keywords: Optimal taxation; tax evasion; voting experiments;

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References

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Cited by:
  1. Vargas, Jose P Mauricio, 2012. "To be or not to be informal?: A Structural Simulation," MPRA Paper 41290, University Library of Munich, Germany.
  2. 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.

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