Optimal observability in a linear income tax

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.

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Year of publication:	2010
Authors:	Slemrod, Joel ; Traxler, Christian
Publisher:	Bonn : Max Planck Institute for Research on Collective Goods
Subject:	optimal linear income taxation \| observability \| tax enforcement

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Series:	Preprints of the Max Planck Institute for Research on Collective Goods ; 2010,04
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	617294348 [GVK] hdl:10419/32230 [Handle]
Classification:	H21 - Efficiency; Optimal Taxation ; H11 - Structure, Scope, and Performance of Government ; D8 - Information and Uncertainty
Source:	EconStor

Persistent link: https://www.econbiz.de/10010332986