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Tax Knowledge and Tax Manipulation: A Unifying Model

Author

Listed:
  • Ashley C. Craig
  • Joel Slemrod

Abstract

We provide a unified analysis of taxation and taxpayer education when individuals misunderstand complex tax systems. The analysis is independent of whether income is earned legitimately, or by avoiding or evading taxes. In this sense, learning about tax minimization strategies is similar to learning about the tax code. The government balances a trade-off: a better understanding of the tax system allows taxpayers to optimize more effectively, but affects government revenue. Optimal taxpayer education and optimal redistribution are characterized ex post by aggregate sufficient statistics that do not require information about how biases or behavioral responses vary across the decision margins.

Suggested Citation

  • Ashley C. Craig & Joel Slemrod, 2024. "Tax Knowledge and Tax Manipulation: A Unifying Model," Journal of Political Economy Microeconomics, University of Chicago Press, vol. 2(2), pages 298-334.
    • Handle: RePEc:ucp:jpemic:doi:10.1086/727557
    DOI: 10.1086/727557
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    Cited by:

    1. Philippe Aghion & Maxime Gravoueille & Matthieu Lequien & Stefanie Stantcheva, 2017. "Tax Simplicity or Simplicity of Evasion? Evidence from Self-Employment Taxes in France," NBER Working Papers 24049, National Bureau of Economic Research, Inc.
    2. Gao, Wenjing & Mao, Jie & Shi, Xinzheng, 2024. "Do firms benefit from public information services: Evidence from a tax hotline program in China," China Economic Review, Elsevier, vol. 83(C).
    3. Louis Kaplow, 2022. "Optimal Income Taxation," NBER Working Papers 30199, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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