There is an inconsistency between the way income tax progressivity is measured and the policy instruments typically used by the income tax authorities. This inconsistency leads to violation of Feldstein´s principle of horizontal equity and causes unintentional reranking among families of...

Mental accounting practices of self-employed taxpayers are investigated in two studies. Interviews (N=30) revealed that perceptions of the tax due differ widely. While a majority mentally segregate the tax component from their net income, others claim ownership of the gross income as a whole and...

Over the last few years concern for income inequality in Europe has increased remarkably. In this context, taxation is an important redistributive instrument, and we investigate the redistributive role of direct taxes. We focus on the EU-15 countries and the evolution over the period 1998-2008,...

The present paper quantifies the economic consequences of eliminating the system of income splitting in Germany. We apply a dynamic simulation model with overlapping generations where single and married agents decide on labor supply and homework under income and life-span risk. We compute...

I demonstrate how the discrete model of optimum income taxation can be used to derive the structure of optimal income tax rates. I compare simulations of the discrete and continuous models of optimum income taxation under identical circumstances, based on U.S. wage data. The two models produce...

We analyze the distributive justice of the combined burden of taxes, social security contributions, and public transfers on employee households. Comparing eight different household types, we utilize the concept of horizontal equity regarding the treatment of families in the German tax-benefit...

Generational Accounting is only a shortcut to a general equilibrium analysis because it is assumed that individual decisions are unaffected by policy reforms. Nonetheless only two studies examine the accuracy of Generational Accounting, but Fehr and Kotlikoff (1996) consider changes in...

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a...

A model is presented for simulating the level of taxes imposed on highly skilled labor. The effective average tax rate, defined as the relative wedge between employment costs and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent...

Using cumulative prospect theory as a notable example of reference-dependent preference, we revisit the basic portfolio model of tax evasion. We show that some controversial implications of the standard expected-utility theory, including that of a negative relationship between tax rates and...