 Do the Poor Benefit From a Well Defined Tax Regime?Marisa Ratto and Simon Vicary Journal of Public Economic Theory, 2025, vol. 27, issue 4 Abstract: The uncertainty of the tax base is the central issue we consider in this paper. Top‐income earners benefit from the wealth management industry's supply of sophisticated schemes, allowing them to adopt a gray‐area avoidance/evasion position. This fact makes the assessment of the tax base uncertain, even for the tax authority. Our research questions are: when should sophisticated evasion be deterred? How should a utilitarian government set tax rates accordingly? Does the uncertainty of the tax base disadvantage less fortunate taxpayers? We show that risk aversion plays a role. It has to be quite low for the tax authority not to enforce compliance. When compliance is enforced, if the rich are concentrated enough at the top of the income distribution—a mild condition—we find that the tax rate applied on the lower income should be minimized, a parallel with Edgeworth's old utilitarian proposition on equal marginal sacrifice. Our analysis also suggests that government uncertainty about the tax base will actually benefit the poor, provided tax compliance is enforced. Date: 2025 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:27:y:2025:i:4:n:e70040 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.