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Does higher tax morale imply higher optimal labor income tax rate?

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  • Andras Simonovits

    () (Institute of Economics, Research Center for Economic and Regional Studies, Hungarian Academy of Sciences, also Institute of Mathematics, Budapest University of Technology and Economics also Department of Economics, CEU)

Abstract

We analyze the impact of tax morale on the optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale. Limiting the utilitarianism to the poorer parts of the population (defined by the inclusion share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the inclusion share, provide that the average wage of the included is higher than 0.54 times the average wage.

Suggested Citation

  • Andras Simonovits, 2012. "Does higher tax morale imply higher optimal labor income tax rate?," IEHAS Discussion Papers 1218, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1218
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    References listed on IDEAS

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    23. Andras Simonovits, 2011. "Higher tax morale implies a higher optimal income tax rate," IEHAS Discussion Papers 1137, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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    Citations

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    Cited by:

    1. Zoltan Imre Nagy & Viktor Valo, 2013. "The Lawful Execution Of Employer Rights Is An Important Subsystem Of Corporate Governance (A Labour Case Study)," DANUBE: Law and Economics Review, European Association Comenius - EACO, pages 201-217.
    2. Zuzana Machova & Igor Kotlan, 2014. "Expenditures on Collective and Individual Services: Discussion on the Classification of Government Expenditures with Regard to their Inclusion into Growth Models," DANUBE: Law and Economics Review, European Association Comenius - EACO, pages 287-296.
    3. Boda, Zsolt & Bartha, Attila, 2016. "Adómorál, bizalom és kényszerek - adózási motivációk Magyarországon korrupciós botrányok idején
      [Tax morale, trust and constraints: Tax-compliance motivations in Hungary during corruption scandals]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1021-1045.
    4. Andras Simonovits, 2013. "A family of simple paternalistic transfer models," IEHAS Discussion Papers 1324, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

    More about this item

    Keywords

    tax morale; progressive income tax; undeclared earning; labor supply; income redistribution;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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