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Tax Morale and Optimal Taxation

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  • Werner Güth
  • Rupert Sausgruber

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.

Suggested Citation

  • Werner Güth & Rupert Sausgruber, 2004. "Tax Morale and Optimal Taxation," CESifo Working Paper Series 1284, CESifo.
    • Handle: RePEc:ces:ceswps:_1284
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    Cited by:

    1. Gaetano Lisi, 2015. "Tax morale, tax compliance and the optimal tax policy," Economic Analysis and Policy, Elsevier, vol. 45(c), pages 27-32.
    2. Vargas, Jose P Mauricio, 2012. "To be or not to be informal?: A Structural Simulation," MPRA Paper 41290, University Library of Munich, Germany.
    3. Robert Ullmann & Christoph Watrin, 2008. "Comparing Direct and Indirect Taxation: The Influence of Framing on Tax Compliance," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 5(1), pages 23-56, June.

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    More about this item

    Keywords

    optimal taxation; tax evasion; voting; experiments;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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