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Tax Morality and Progressive Wage Tax

Andras Simonovits ()
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Andras Simonovits: Institute of Economics - Hungarian Academy of Sciences

No 1005, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: We analyze the impact of tax morality on progressive income (wage) taxation. We assume that transfers (cash-back) and public expenditures are financed from linear wage taxes. We derive the reported wages from individual utility maximization, when individuals obtain partial satisfaction from reporting wages (depending on their tax morality), and cannot be excluded from the use of public services. The government maximizes a utilitarian social welfare function, also taking into account the utility of public services. The major conjecture is illustrated by numerical examples: the optimal degree of redistribution and the size of the public services are increasing functions of the individuals' tax morality.

Keywords: tax moral; reporting earnings; progressive income tax; welfare economics (search for similar items in EconPapers)
JEL-codes: D91 H55 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-03
New Economics Papers: this item is included in nep-acc, nep-hpe, nep-pbe and nep-pub
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Citations: View citations in EconPapers (2)

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