Tax Morale and Optimal Taxation

29 Pages Posted: 22 Oct 2004

See all articles by Rupert Sausgruber

Rupert Sausgruber

Vienna University of Economics and Business - Department of Economics

Werner Güth

Max Planck Institute for Research on Collective Goods; Luiss Guido Carli University

Date Written: September 2004

Abstract

We study experimentally how taxpayers choose between two tax regimes to fund a public good. The first-best tax regime imposes a general, distortion-free income tax. However, this tax cannot be enforced. The second-best alternative supplements the income tax by a specific commodity tax. This tax cannot be evaded but distorts optimal consumption choices, instead. The result is that a large majority of subjects prefer the general income tax regime. The bulk of votes is consistent with actual payoffs. We isolate tax morale as cause for payoffs above theoretical predictions.

Keywords: optimal taxation, tax evasion, voting, experiments

JEL Classification: C91, H21, H26

Suggested Citation

Sausgruber, Rupert and Güth, Werner, Tax Morale and Optimal Taxation (September 2004). Available at SSRN: https://ssrn.com/abstract=608941 or http://dx.doi.org/10.2139/ssrn.608941

Rupert Sausgruber (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria
+43 1 31336 4572 (Phone)

Werner Güth

Max Planck Institute for Research on Collective Goods

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

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