Redistributive Taxation Under Ethical Behaviour

CIRPEE Working Paper No. 06-04

34 Pages Posted: 20 Feb 2006

See all articles by Robin Boadway

Robin Boadway

Queen's University; CESifo (Center for Economic Studies and Ifo Institute); Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE)

Nicolas Marceau

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE)

Steeve Mongrain

Simon Fraser University (SFU) - Department of Economics

Date Written: February 2006

Abstract

We consider the implications of ethical behaviour on the effect of a redistributive tax-transfer system. In choosing their labour supplies, individuals take into account whether their tax liabilities correspond to what they view as ethically acceptable. If tax liabilities are viewed as ethically acceptable, a taxpayer behaves ethically, does not distort her behaviour, and chooses to work as if she were not taxed. On the other hand, if ethical behaviour results in tax liabilities that exceed those that are ethically acceptable, she behaves egoistically (partially or fully), distorts her behaviour, and chooses her labour supply taking into account the income tax. We establish taxpayers' equilibrium behaviour and obtain that labour supply is less elastic when taxpayers may behave ethically than when they act egoistically. We characterize and compare the egoistic voting equilibrium linear tax schedules under potentially ethical and egoistic behaviour. We also compare our results to those obtained under altruism, an alternative benchmark.

Keywords: Ethical behaviour, Kantian preferences, income taxation, redistribution

JEL Classification: H24, H21, Z13

Suggested Citation

Boadway, Robin and Marceau, Nicolas and Mongrain, Steeve, Redistributive Taxation Under Ethical Behaviour (February 2006). CIRPEE Working Paper No. 06-04. Available at SSRN: https://ssrn.com/abstract=882142 or http://dx.doi.org/10.2139/ssrn.882142

Robin Boadway

Queen's University ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada
613-533-2266 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://qed.econ.queensu.ca/pub/faculty/boadway/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE)

Ste-Foy, Quebec G1K 7P4
Canada

Nicolas Marceau (Contact Author)

Centre Interuniversitaire sur le Risque, les Politiques Economiques et l'Emploi (CIRPEE) ( email )

Ste-Foy, Quebec G1K 7P4
Canada

Steeve Mongrain

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-3547 (Phone)
604-291-5944 (Fax)

HOME PAGE: http://www.sfu.ca/~mongrain/

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