Tax Aversion, Optimal Tax Rates, and Indexation
Taking account of the costs of tax evasion and avoidance activity together with the government's costs of tax enforcement it is shown that the optimal point on a stylized Laffer curve is located on the positively sloped region, not at the maximum point of the, curve. The analysis eschews the usual supply-side-type rationale for the Laffer curve and shows that such a curve can arise solely as a consequence of the optimizing tax aversion activity of a utility maximizing economic agent. The analysis further implies that indexation to inflation may be warranted by considerations of economic efficiency.
|Date of creation:||Jul 1988|
|Publication status:||published as Public Finance, Vol. 43, No. 2, pp. 310-325, (1988).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fullerton, Don, 1982.
"On the possibility of an inverse relationship between tax rates and government revenues,"
Journal of Public Economics,
Elsevier, vol. 19(1), pages 3-22, October.
- Don Fullerton, 1980. "On the Possibility of an Inverse Relationship between Tax Rates and Government Revenues," NBER Working Papers 0467, National Bureau of Economic Research, Inc.
- Isachsen, Arne Jon & Strom, Steinar, 1980. " The Hidden Economy: The Labor Market and Tax Evasion," Scandinavian Journal of Economics, Wiley Blackwell, vol. 82(2), pages 304-311.
- Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
- Christiansen, Vidar, 1980. "Two comments on tax evasion," Journal of Public Economics, Elsevier, vol. 13(3), pages 389-393, June.
- Stuart, Charles E, 1981. "Swedish Tax Rates, Labor Supply, and Tax Revenues," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 1020-1038, October.
- Cowell, F A, 1981. "Taxation and Labour Supply with Risky Activities," Economica, London School of Economics and Political Science, vol. 48(192), pages 365-379, November.
- Bender, Bruce, 1984. "An Analysis of the Laffer Curve," Economic Inquiry, Western Economic Association International, vol. 22(3), pages 414-420, July.
- McCaleb, Thomas S, 1976. "Tax Evasion and the Differential Taxation of Labor and Capital Income," Public Finance = Finances publiques, , vol. 31(2), pages 287-294.
- Weiss, Laurence, 1976. "The Desirability of Cheating Incentives and Randomness in the Optimal Income Tax," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1343-1352, December.
- Cross, Rodney & Shaw, G K, 1982. "On the Economics of Tax Aversion," Public Finance = Finances publiques, , vol. 37(1), pages 36-47.
- Usher, Dan, 1986. "Tax Evasion and the Marginal Cost of Public Funds," Economic Inquiry, Western Economic Association International, vol. 24(4), pages 563-586, October.
- Dan Usher, 1986. "Tax Evasion and the Marginal Cost of Public Funds," Working Papers 637, Queen's University, Department of Economics.
- Slemrod, Joel B, 1985. "An Empirical Test for Tax Evasion," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 232-238, May.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Friedland, Nehemiah & Maital, Shlomo & Rutenberg, Aryeh, 1978. "A simulation study of income tax evasion," Journal of Public Economics, Elsevier, vol. 10(1), pages 107-116, August.
- Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
- Christiansen, Vidar, 1980. "Two Comments on Tax Evasion," Empirical Economics, Springer, vol. 13(3), pages 389-393, June.
- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-373, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2643. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.