Tax Morale and the Taming of Leviathan
21 Pages Posted: 8 Jul 2005
There are 2 versions of this paper
Tax Morale and the Taming of Leviathan
Tax Morale and the Taming of Leviathan
Date Written: October 2004
Abstract
An explanation for tax morale based upon a simple model of psychological costs that depend on the perceived legitimacy of public policies is introduced. It is shown that empirically observed low levels of tax evasion can be explained even for a risk-neutral taxpayer with this model. In a discussion of aggregate tax revenue, it is argued that tax revenue as a function of tax rates may differ fundamentally from the notorious Laffer curve. An incompletely informed Leviathan government that incrementally varies the tax rate in order to maximise revenue may end up on the wrong side of the Laffer curve and set too high tax rates. An explanation for tax morale based upon a simple model of psychological costs that depend on the perceived legitimacy of public policies is introduced.
Keywords: Tax evasion, tax morale, cognitive dissonance, informal institutions
JEL Classification: H26, Z13
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Motivation Crowding Theory: A Survey of Empirical Evidence
By Bruno S. Frey and Reto Jegen
-
Motivation, Knowledge Transfer, and Organizational Forms
By Margit Osterloh and Bruno S. Frey
-
Trust Breeds Trust: How Taxpayers are Treated
By Lars P. Feld and Bruno S. Frey