Tax Morality and Progressive Wage Tax
AbstractWe analyze the impact of tax morality on progressive income (wage) taxation. We assume that transfers (cash-back) and public expenditures are financed from linear wage taxes. We derive the reported wages from individual utility maximization, when individuals obtain partial satisfaction from reporting wages (depending on their tax morality), and cannot be excluded from the use of public services. The government maximizes a utilitarian social welfare function, also taking into account the utility of public services. The major conjecture is illustrated by numerical examples: the optimal degree of redistribution and the size of the public services are increasing functions of the individuals' tax morality.
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Bibliographic InfoPaper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1005.
Length: 23 pages
Date of creation: Mar 2010
Date of revision:
tax moral; reporting earnings; progressive income tax; welfare economics;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-04-24 (Accounting & Auditing)
- NEP-ALL-2010-04-24 (All new papers)
- NEP-HPE-2010-04-24 (History & Philosophy of Economics)
- NEP-PBE-2010-04-24 (Public Economics)
- NEP-PUB-2010-04-24 (Public Finance)
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- Zsombor Z. Méder & András Simonovits & János Vinczeb, 2012.
"Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality,"
Economic Analysis and Policy (EAP),
Queensland University of Technology (QUT), School of Economics and Finance, vol. 42(2), pages 171-188, September.
- Zsombor Z. Meder & Andras Simonovits & Janos Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," IEHAS Discussion Papers 1203, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Zsombor Z. Méder & András Simonovits & János Vincze, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Working Papers 1202, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
- Garay, Barnabás M. & Simonovits, András & Tóth, János, 2012.
"Local interaction in tax evasion,"
Elsevier, vol. 115(3), pages 412-415.
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