Tax Morale and Optimal Taxation

Werner Güth () and Rupert Sausgruber

No CESifo Working Paper No. 1284, CESifo Working Paper Series from CESifo GmbH

Abstract: We study experimentally how taxpayers choose between two tax regimes to fund a public good. The first-best tax regime imposes a general, distortion-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.

Keywords: optimal taxation; tax evasion; voting; experiments (search for similar items in EconPapers)
JEL-codes: C91 H21 H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp, nep-pbe and nep-pub
Date: Written 2004
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Working Paper: Tax Morale and Optimal Taxation (2004)
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