Nice Guys Finish Last: Are People with Higher Tax Morale Taxed More Heavily?

38 Pages Posted: 21 Jan 2012

See all articles by Philipp Doerrenberg

Philipp Doerrenberg

ZEW – Leibniz Centre for European Economic Research; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

Denvil Duncan

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA); Institute for the Study of Labor (IZA)

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research; University of Mannheim - School of Economics (VWL); IZA Institute of Labor Economics; University of Essex - Institute for Social and Economic Research (ISER)

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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.

Keywords: tax morale, tax compliance, optimal taxation, political economy

JEL Classification: H2, H3, D7

Suggested Citation

Doerrenberg, Philipp and Duncan, Denvil and Fuest, Clemens and Peichl, Andreas, Nice Guys Finish Last: Are People with Higher Tax Morale Taxed More Heavily?. IZA Discussion Paper No. 6275. Available at SSRN: https://ssrn.com/abstract=1989247

Philipp Doerrenberg (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 71
D-68034 Mannheim, 68034
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Munich
Germany

Denvil Duncan

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
Germany
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539
Germany

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
Germany
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

Andreas Peichl

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Mannheim - School of Economics (VWL) ( email )

Mannheim 68131
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University of Essex - Institute for Social and Economic Research (ISER)

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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