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:	2010-01
Authors:	Slemrod, Joel ; Traxler, Christian
Institutions:	Max-Planck-Institut zur Erforschung von Gemeinschaftsgütern, Max-Planck-Gesellschaft
Subject:	optimal linear income taxation \| observability \| tax enforcement

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Extent:	application/pdf
Series:	Working Paper Series of the Max Planck Institute for Research on Collective Goods.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2010_04
Classification:	D8 - Information and Uncertainty ; H11 - Structure, Scope, and Performance of Government ; H21 - Efficiency; Optimal Taxation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008567632