Author : Daniel A. Moncayo
Publisher :
ISBN 13 : 9781369147322
Total Pages : 146 pages
Book Rating : 4.1/5 (473 download)
Book Synopsis Old and New Ideas in Public Economics by : Daniel A. Moncayo
Download or read book Old and New Ideas in Public Economics written by Daniel A. Moncayo and published by . This book was released on 2016 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the final chapter I continue the work of the second chapter. I show that under different assumptions for the cost of tax avoidance, the previous result that taxpayers income reports must equal their income doesn't hold. The optimal tax policy when the cost of tax avoidance is convex encourages tax avoidance for taxpayers in the middle of the income distribution. Tax avoidance allows the government to levy higher taxes on high-income taxpayers. By changing the distribution of income through tax avoidance, the government can make it more expensive for high-income taxpayers to misreport their income. Hence, tax avoidance can lead to higher tax revenues. Furthermore, tax avoidance creates a division between statutory and effective tax rates. This division implies that optimal statutory tax rates are lower than effective rates, which are the true measure of a government's redistribution ability. This suggests that the estimates of after-tax inequality and tax revenues calculated using standard models are overstated, and that governments might be more limited in providing social insurance than previously thought.