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How Tax Complexity and Enforcement Affect the Equity and Efficiency of The Income Tax

  • Louis Kaplow

Much criticism of the income tax involves administration: the enormous complexity of the system is responsible for large compliance costs, public and private, and the tax gap is large despite substantial resources devoted to enforcement. The desire for simplification and improved compliance motivates various incremental reforms as well as proposals for fundamental restructuring of the tax system. But evaluation of such changes is difficult because the underlying problems have not been analyzed in terms of the equity and efficiency concerns that animate more familiar assessments of income tax policy. This article provides a framework for a unified analysis, in which the same factors that are used to justify the choice of the tax base and the rate structure are employed to resolve problems involving complexity, compliance costs, and enforcement difficulties.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5391.

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Date of creation: Dec 1995
Date of revision:
Publication status: published as National Tax Journal, vol. 49, pp. 135-150, (1996).
Handle: RePEc:nbr:nberwo:5391
Note: PE
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  1. Alm, James & Sanchez, Isabel & de Juan, Ana, 1995. "Economic and Noneconomic Factors in Tax Compliance," Kyklos, Wiley Blackwell, vol. 48(1), pages 3-18.
  2. Joel Slemrod & Nikki Sorum, 1984. "The Compliance Cost of the U.S. Individual Income Tax System," NBER Working Papers 1401, National Bureau of Economic Research, Inc.
  3. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
  4. Joel Slemrod & Shlomo Yitzhaki, 1985. "The Optimal Size of a Tax Collection Agency," NBER Working Papers 1759, National Bureau of Economic Research, Inc.
  5. Mayshar, Joram, 1991. " Taxation with Costly Administration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 75-88.
  6. Joel Slemrod & Shlomo Yitzhaki, 1995. "The Costs of Taxation and the Marginal Cost of Funds," IMF Working Papers 95/83, International Monetary Fund.
  7. Kaplow, Louis, 1990. "Optimal taxation with costly enforcement and evasion," Journal of Public Economics, Elsevier, vol. 43(2), pages 221-236, November.
  8. Yitzhaki, Shlomo, 1979. "A Note on Optimal Taxation and Administrative Costs," American Economic Review, American Economic Association, vol. 69(3), pages 475-80, June.
  9. Joel Slemrod & Shlomo Yitzhaki, 1994. "Analyzing the standard deduction as a presumptive tax," International Tax and Public Finance, Springer, vol. 1(1), pages 25-34, February.
  10. Louis Kaplow, 1994. "A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism," NBER Working Papers 4961, National Bureau of Economic Research, Inc.
  11. Louis Kaplow, 1985. "Horizontal Equity: Measures in Search of a Principle," NBER Working Papers 1679, National Bureau of Economic Research, Inc.
  12. Kaplow, Louis, 1995. "A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism," National Tax Journal, National Tax Association, vol. 48(4), pages 497-514, December.
  13. Mirrlees, J A, 1990. "Taxing Uncertain Incomes," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 34-45, January.
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