<abstract xmlns="http://www.w3.org/1999/xhtml"><p>We analyze the impact of tax morale on optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale. Limiting the utilitarianism to the poorer parts of the population (defined by the inclusion share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the inclusion share, provided that the average wage of those included is higher than 0.54 times the average wage.</p></abstract>

We analyze the impact of tax morale on optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing of public goods is neglected. Each individual supplies labor and (un)declares earning, depending on his labor disutility and tax morale. Limiting the utilitarianism to the poorer parts of the population (defined by the inclusion share), the optimal tax rate is an increasing function of the tax morale and a decreasing function of the inclusion share, provided that the average wage of those included is higher than 0.54 times the average wage.

Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?

Institute of Economics, Hungarian Academy of Sciences, Budaörsi út. 45, 1112 Budapest, Hungary

DANUBE

{"article-title":"Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?"}

We analyze the impact of tax morale on optimal progressive labor income taxation. Only universal basic income is financed from a linear tax and the financing...

Does Higher Tax Morale Imply Higher Optimal Labor Income Tax Rate?

Published Online: Jul 08, 2013

Page range: 97 - 114

DOI: https://doi.org/10.2478/danb-2013-0005

This content is open access.