Optimal Observability in a Linear Income Tax
11 Pages Posted: 11 Jan 2010
Date Written: December 2010
Abstract
We study the optimal observability of the tax base within the standard linear income tax problem, where observability is determined by the government’s investment into the accurate measurement of the tax base. We characterize the optimal level of observability and derive a new expression for the optimal progressivity, which – in addition to the standard equity efficiency trade-off – accounts for the limited accuracy of an income tax system.
Keywords: optimal linear income taxation, observability, tax enforcement
JEL Classification: H21, H11, D8
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of The1986 Tax Reform Act
-
Tax Avoidance, Evasion, and Administration
By Joel B. Slemrod and Shlomo Yitzhaki
-
The Elasticity of Taxable Income: Evidence and Implications
By Jonathan Gruber and Emmanuel Saez
-
What Happens When You Tax the Rich? Evidence from Executive Compensation
-
A New Method of Estimating Risk Aversion
By Raj Chetty
-
Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications
-
Are "Real" Responses to Taxes Simply Income Shifting between Corporate and Personal Tax Bases?
By Roger H. Gordon and Joel B. Slemrod