Constitutional Political Economy

, Volume 17, Issue 2, pp 117–132 | Cite as

Tax Morale and the Taming of Leviathan

Original Article

Abstract

An explanation for tax morale based upon a simple model of psychological costs that depend on the perceived legitimacy of public policies is introduced. It is shown that empirically observed low levels of tax evasion can be explained even for a risk-neutral taxpayer with such a model. In a discussion of aggregate tax revenue, it is argued that tax revenue as a function of tax rates may differ fundamentally from the notorious Laffer curve. It is then necessary to look at the interaction of formal and informal institutions to predict the nominal tax rates chosen by a revenue maximizer.

Keywords

Tax evasion Tax morale Cognitive dissonance Informal institutions 

JEL classification

H26 Z13 

Notes

Acknowledgements

This is an overhauled version of a paper that was presented at the 2002 annual conferences of the Royal Economic Society and the European Public Choice Society, and in seminars at the Universities of Innsbruck and St. Gallen. I would like to thank the participants of these sessions and seminars for comments, especially Pio Baake, Lars P. Feld, Bruno Frey, Gebhard Kirchgässner and Alfred Meier. I am also indebted to a careful anonymous referee of this journal for very helpful comments. Despite their helpful comments, the usual disclaimer still applies.

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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  1. 1.Department for Public EconomicsPhilipps-University MarburgMarburgGermany

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