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Tax Morality and Progressive Wage Tax

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  • Andras Simonovits

    () (Institute of Economics - Hungarian Academy of Sciences)

Abstract

We analyze the impact of tax morality on progressive income (wage) taxation. We assume that transfers (cash-back) and public expenditures are financed from linear wage taxes. We derive the reported wages from individual utility maximization, when individuals obtain partial satisfaction from reporting wages (depending on their tax morality), and cannot be excluded from the use of public services. The government maximizes a utilitarian social welfare function, also taking into account the utility of public services. The major conjecture is illustrated by numerical examples: the optimal degree of redistribution and the size of the public services are increasing functions of the individuals' tax morality.

Suggested Citation

  • Andras Simonovits, 2010. "Tax Morality and Progressive Wage Tax," IEHAS Discussion Papers 1005, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1005
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    References listed on IDEAS

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    Cited by:

    1. Zsombor Z. Méder & András Simonovits & János Vinczeb, 2012. "Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality," Economic Analysis and Policy, Elsevier, vol. 42(2), pages 171-188, September.
    2. Garay, Barnabás M. & Simonovits, András & Tóth, János, 2012. "Local interaction in tax evasion," Economics Letters, Elsevier, vol. 115(3), pages 412-415.

    More about this item

    Keywords

    tax moral; reporting earnings; progressive income tax; welfare economics;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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