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Accuracy, Complexity, and the Income Tax

Author

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  • Kaplow, Louis

Abstract

The complexity of the income tax is an unending source of complaint, and compliance costs are estimated to be very large. Yet most recognize that some degree of complexity is necessary if income 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. In addition, the article takes into account that compliance costs and the effects of complex provisions are endogenous, determined in significant part by taxpayers' information acquisition efforts. The article addresses whether taxpayers have excessive or inadequate incentives to acquire information about taxable income and to challenge tax assessments. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Kaplow, Louis, 1998. "Accuracy, Complexity, and the Income Tax," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 14(1), pages 61-83, April.
    • Handle: RePEc:oup:jleorg:v:14:y:1998:i:1:p:61-83
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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. Youssef Benzarti, 2020. "How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs," American Economic Journal: Economic Policy, American Economic Association, vol. 12(4), pages 38-57, November.
    3. Bönke, Timm & Jochimsen, Beate & Schröder, Carsten, 2014. "Fiscal federalism and tax enforcement," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100394, Verein für Socialpolitik / German Economic Association.
    4. 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.
    5. Louis Kaplow, 2024. "Optimal Income Taxation," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 637-738, June.
    6. Kate Krause, 2000. "Tax Complexity: Problem or Opportunity?," Public Finance Review, , vol. 28(5), pages 395-414, September.
    7. Grottke, Markus & Lorenz, Johannes, 2017. "Tax consultants' incentives: A game-theoretic investigation into the behavior of tax consultants, taxpayers, and the tax authority in a setting of tax complexity," Passauer Diskussionspapiere, Betriebswirtschaftliche Reihe B-30-17, University of Passau, Faculty of Business and Economics.
    8. Martin Besfamille & Pablo Olmos, 2010. "Inspectors or Google Earth? Optimal fiscal policies under uncertain detection of evaders," Department of Economics Working Papers 2010-09, Universidad Torcuato Di Tella.
    9. Nigar Hashimzade, 2023. "Tax Uncertainty and Welfare-Improving Tax Disputes," CESifo Working Paper Series 10392, CESifo.
    10. Bönke Timm & Schröder Carsten & Jochimsen Beate, 2017. "Fiscal Equalization and Tax Enforcement," German Economic Review, De Gruyter, vol. 18(3), pages 377-409, August.

    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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