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Tax Morale and Optimal Taxation

Listed author(s):
  • Werner Güth
  • Rupert Sausgruber

We study experimentally how taxpayers choose between two tax regimes to fund a public good. The first-best tax regime imposes a general, distortion-free income tax. However, this tax cannot be enforced. The second-best alternative supplements the income tax by a specific commodity tax. This tax cannot be evaded but distorts optimal consumption choices, instead. The result is that a large majority of subjects prefer the general income tax regime. The bulk of votes is consistent with actual payoffs. We isolate tax morale as cause for payoffs above theoretical predictions.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-09/cesifo1_wp1284.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1284.

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Date of creation: 2004
Handle: RePEc:ces:ceswps:_1284
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