Tax Aversion, Optimal Tax Rates, and Indexation
AbstractTaking account of the costs of tax evasion and avoidance activity together with the government's costs of tax enforcement it is shown that the optimal point on a stylized Laffer curve is located on the positively sloped region, not at the maximum point of the, curve. The analysis eschews the usual supply-side-type rationale for the Laffer curve and shows that such a curve can arise solely as a consequence of the optimizing tax aversion activity of a utility maximizing economic agent. The analysis further implies that indexation to inflation may be warranted by considerations of economic efficiency.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2643.
Date of creation: Mar 1989
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