Inattention and the Taxation Bias

Jérémy Boccanfuso and Antoine Ferey

No 323, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: This paper shows that agent inattention to taxes generates a time-inconsistency problem in the choice of tax policy. In equilibrium, inattention leads to inefficiently high tax rates and a taxation bias emerges. Combining structural and sufficient statistics approaches, we quantify the magnitude and the welfare effects of this policy distortion for US income tax rates, and find that the taxation bias is large, alters the progressivity of income taxes, and significantly reduces social welfare. Overall, our findings shed new light on the policy and welfare implications of inattention and misperceptions.

Keywords: optimal taxation; inattention (search for similar items in EconPapers)
JEL-codes: D03 H21 (search for similar items in EconPapers)
Date: 2022-04-13
New Economics Papers: this item is included in nep-pbe
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Related works:
Journal Article: Inattention and the Taxation Bias (2024)
Working Paper: Inattention and the Taxation Bias (2023)
Working Paper: Inattention and the Taxation Bias (2023)
Working Paper: Inattention and the Taxation Bias (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:323

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