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Tax Aversion, Laffer Curve, and the Self-financing of Tax Cuts

Author

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  • Gerasimos T. Soldatos

Abstract

High taxation is found to lead not to less labor supply but to more tax evasion and/or black labor. Investigating next what this implies for the course of the tax revenue and subsequently for the shape of the Laffer curve, this curve is found to change with the tax induced change of taxpayer preferences over tax compliance and tax aversion. Hence, the relevant Laffer curve when contemplating tax cuts should be the one after the last tax increase and cannot thereby be fully self-financed.

Suggested Citation

  • Gerasimos T. Soldatos, 2015. "Tax Aversion, Laffer Curve, and the Self-financing of Tax Cuts," Applied Economics and Finance, Redfame publishing, vol. 2(2), pages 14-18, May.
    • Handle: RePEc:rfa:aefjnl:v:2:y:2015:i:2:p:14-18
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    Citations

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    Cited by:

    1. Stanisław Cichocki & Ryszard Kokoszczyński, 2016. "The evolution of the Laffer curve as a framework for studying tax evasion: from simple theoretical to DSGE models," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 45.
    2. Emilian Dobrescu, 2018. "Functional trinity of public finance in an emerging economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-27, December.

    More about this item

    Keywords

    Laffer curve; Tax evasion/black labor; Self-financing tax cuts;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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