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Accuracy, Complexity, and the Income Tax

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  • Louis Kaplow

Abstract

The complexity of the income tax is an unending source of complaint. Compliance costs have received increasing attention and are estimated to be large. Yet most recognize that some degree of complexity is necessary if ability to pay is to be measured accurately. This article presents a framework for analyzing the value of greater accuracy in income taxation. Formulations for both distributive and incentive benefits of accuracy are offered. The question whether taxpayers have excessive or inadequate incentives to acquire information about taxable income and to challenge tax assessments is also examined.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4631.

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Date of creation: Jan 1994
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Publication status: published as Journal of Law, Economics, and Organization, vol. 14, no. 1, pp. 61-83, 1998.
Handle: RePEc:nbr:nberwo:4631

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  1. Stern, Nicholas, 1982. "Optimum taxation with errors in administration," Journal of Public Economics, Elsevier, vol. 17(2), pages 181-211, March.
  2. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
  3. Scotchmer, Suzanne & Slemrod, Joel, 1989. "Randomness in tax enforcement," Journal of Public Economics, Elsevier, vol. 38(1), pages 17-32, February.
  4. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  5. Beck, Paul J. & Jung, Woon-Oh, 1989. "Taxpayer compliance under uncertainty," Journal of Accounting and Public Policy, Elsevier, vol. 8(1), pages 1-27.
  6. Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, vol. 18(1), pages 1-33, June.
  7. Louis Kaplow & Steven Shavell, 1991. "Private Versus Socially Optimal Provision of Ex Ante Legal Advice," NBER Working Papers 3868, National Bureau of Economic Research, Inc.
  8. Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-80, June.
  9. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
  10. Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March.
  11. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
  12. Louis Kaplow, 1985. "Horizontal Equity: Measures in Search of a Principle," NBER Working Papers 1679, National Bureau of Economic Research, Inc.
  13. Mookherjee, Dilip & Png, Ivan, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 399-415, May.
  14. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
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Cited by:
  1. Slemrod, Joel & Traxler, Christian, 2010. "Optimal observability in a linear income tax," Economics Letters, Elsevier, vol. 108(2), pages 105-108, August.
  2. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470 Elsevier.

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