Optimal tax systems with endogenous behavioral biases

Dylan T. Moore and Joel Slemrod

Journal of Public Economics, 2021, vol. 197, issue C

Abstract: We develop an optimal tax framework that combines two recent extensions of tax analysis: a tax-systems emphasis on non-rate policy instruments, and a recognition of the role of behavioral biases. Although the implications of taxpayers’ biases for optimal tax rates have received considerable attention, a complete analysis of this aspect of optimal tax theory must account for the fact that such biases are often endogenous to the non-rate aspects of a tax system. We first generalize and extend the analysis of optimal tax systems to incorporate endogenous behavioral biases. We then develop a novel and important application of this issue, showing how misperception of the tax rate affects the optimal breadth of the tax base.

Keywords: Taxation; Behavioral economics; Optimal tax (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:197:y:2021:i:c:s0047272721000207

DOI: 10.1016/j.jpubeco.2021.104384

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