Optimal observability in a linear income tax

Joel Slemrod and Christian Traxler

No 2010_04, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: We study the optimal observability of the tax base within the standard linear income tax problem, where observability is determined by the government’s investment into the accurate measurement of the tax base. We characterize the optimal level of observability and derive a new expression for the optimal progressivity, which – in addition to the standard equity efficiency trade-off – accounts for the limited accuracy of an income tax system.

Keywords: optimal linear income taxation; observability; tax enforcement (search for similar items in EconPapers)
JEL-codes: D8 H11 H21 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-acc, nep-pbe and nep-pub
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Citations: View citations in EconPapers (7)

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Journal Article: Optimal observability in a linear income tax (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_04

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