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Tax Morale and Optimal Taxation

  • Werner Gueth


  • 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, distorsion-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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Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-12.

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Length: 23 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:esi:discus:2004-12
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