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Nice Guys Finish Last: Are People with Higher Tax Morale Taxed More Heavily?Philipp DoerrenbergInstitute for the Study of Labor (IZA); University of Cologne - Faculty of Management, Economics and Social Sciences Denvil DuncanIndiana University Bloomington - School of Public & Environmental Affairs (SPEA); Institute for the Study of Labor (IZA) Clemens FuestUniversity of Oxford; Institute for the Study of Labor (IZA) Andreas PeichlInstitute for the Study of Labor (IZA); University of Cologne - Cologne Centre for Public Economics (CPE); University of Essex - Institute for Social and Economic Research (ISER) IZA Discussion Paper No. 6275 Abstract: This paper is the first to provide evidence of efficient taxation of groups with heterogeneous levels of 'tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that 'nice guys finish last': groups with higher tax morale will be taxed more heavily, simply because taxing them is less costly. Based on unique cross-country micro data and an IV approach to rule out reverse causality, we find empirical support for this hypothesis. Income groups with high tax morale systematically face higher average and marginal tax rates.
Number of Pages in PDF File: 38 Keywords: tax morale, tax compliance, optimal taxation, political economy JEL Classification: H2, H3, D7 working papers seriesDate posted: January 21, 2012Suggested CitationContact Information
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