Favoritism toward the Poor and a Discontinuous Tax Structure

Hideki Sato

MPRA Paper from University Library of Munich, Germany

Abstract: This paper aims to theoretically clarify the following two points. First, even though the government shows favoritism toward the poor and wants to exempt low-income taxpayers and secure its necessary income tax revenue by taxing only high-income taxpayers, the government ends up taxing the poor, which is in opposition to favoritism, due to its inability to observe individual taxpayers'income levels. Second, even without observing each taxpayers' income level, if favoritism is sufficiently strong, the government can discontinuously resolve such unintentional taxation.

Keywords: Favoritism; Optimal income taxation; Tax evasion; Nash equilibrium. (search for similar items in EconPapers)
JEL-codes: D82 H21 H26 (search for similar items in EconPapers)
Date: 2015-04, Revised 2015-06
New Economics Papers: this item is included in nep-pbe
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