Tax Simplicity and Heterogeneous Learning

74 Pages Posted: 5 Mar 2018

See all articles by Philippe Aghion

Philippe Aghion

College de France and London School of Economics and Political Science, Fellow; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Ufuk Akcigit

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); Center for Economic and Policy Research (CEPR)

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE)

Stefanie Stantcheva

Harvard University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: March 2018

Abstract

We study how strongly individuals respond to tax simplicity and how they learn about the complexities of the tax system. We use new French tax returns data on the self-employed from 1994 to 2012. France has three fiscal regimes for the self-employed, which differ in their monetary tax incentives and in their tax simplicity. These regimes are subject to eligibility thresholds: we find large excess masses (bunching) right below the latter. The regimes impact different agents heterogeneously and have changed extensively over time. We estimate a large value for tax simplicity of up to 650 euros per year per individual. Tax complexity has sizable costs: agents are not immediately able to understand what the right regime choice is, leave significant money on the table, and learn over time. These costs are “regressive”, impacting more the uneducated, low income, and low skill agents.

Keywords: Taxation, personal income and business taxes, tax evasion, income elasticity

JEL Classification: H21, H24, H25, H26

Suggested Citation

Aghion, Philippe and Akcigit, Ufuk and Lequien, Matthieu and Stantcheva, Stefanie, Tax Simplicity and Heterogeneous Learning (March 2018). Banque de France Working Paper No. 665. Available at SSRN: https://ssrn.com/abstract=3132923 or http://dx.doi.org/10.2139/ssrn.3132923

Philippe Aghion (Contact Author)

College de France and London School of Economics and Political Science, Fellow ( email )

London
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ufuk Akcigit

University of Chicago - Department of Economics ( email )

1126 E. 59th St
Chicago, IL 60637
United States

HOME PAGE: http://www.ufukakcigit.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Center for Economic and Policy Research (CEPR) ( email )

London
United Kingdom

Matthieu Lequien

National Institute of Statistics and Economic Studies (INSEE) ( email )

18, Boulevard Adolphe-Pinard
92244 Malakoff Cedex
France

Stefanie Stantcheva

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

HOME PAGE: http://scholar.harvard.edu/stantcheva/home

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