Analyzing the standard deduction as a presumptive tax

Abstract

Presumptive taxes can be found in the tax system of most developing countries and make sense when the desired tax base is difficult to measure, verify, and monitor. As a substitute for the desired tax base, the presumed tax base is derived from items that can be more readily monitored. Presumed taxes can also be found in developed countries, and examples include fixed depreciation schedules in place of asset-specific measures of decline in asset value, floors on deductible expenses, and the standard deduction. The authors analyze presumptive income taxation with an ultimate goal to initiate an approach to optimal presumptive taxation. This paper begins that task by analyzing the standard deduction in the individual income tax system in the United States.

This is a preview of subscription content, access via your institution.

We’re sorry, something doesn't seem to be working properly.

Please try refreshing the page. If that doesn't work, please contact support so we can address the problem.

References

  1. Blumenthal, Marsha, and Joel Slemrod. (1992). “The Compliance Cost of the U.S. Individual Income Tax System: A Second Look After Tax Reform.”National Tax Journal, (June) 45, 185–202.

    Google Scholar 

  2. Feldstein, Martin. (1976). “On the Theory of Tax Reform.”Journal of Public Economics (July–August) 6, 77–104.

    Google Scholar 

  3. Kaplow, Louis. (1989). “Horizontal Equity: Measures in Search of a Principle.”National Tax Journal. (June) 42, 139–154.

    Google Scholar 

  4. King, Mervyn. (1983). “An Index of Inequality: With Applications to Horizontal Equity and Social Mobility.”Econometrica (January) 51, 99–115.

    Google Scholar 

  5. Mayshar, Joram. (1991). “Taxation with Costly Administration.”Scandinavian Journal of Economics 93, 75–88.

    Google Scholar 

  6. Mera, Koichi. (1969). “Empirical Determination of Relative Marginal Utilities.”Quarterly Journal of Economics (August) 83, 464–477.

    Google Scholar 

  7. Pitt, Mark, and Joel Slemrod. (1989). “The Compliance Cost of Itemized Deductions.”American Economic Review (December) 79, 1224–1233.

    Google Scholar 

  8. Plotnick, Robert. (1981). “A Measure of Horizontal Equity.”Review of Economics and Statistics 63, 283–288.

    Google Scholar 

  9. Sadka, Efraim, and Vito Tanzi. (1993). “A Tax on Gross Assets of Enterprises as a Form of Presumptive Taxation.”Bulletin of International Fiscal Documentation (February) 47, 66–73.

    Google Scholar 

  10. Sandford, Cedric, Michael Godwin, and Peter Hardwick. (1989).Administrative and Compliance Costs of Taxation. Bath: Fiscal Publications.

    Google Scholar 

  11. Sandmo, Agnar. (1981). “Income Tax Evasion, Labor Supply and the Equity-Efficiency Tradeoff.”Journal of Public Economics (December) 16, 265–288.

    Google Scholar 

  12. Slemrod, Joel, and Nikki Sorum. (1984). “The Compliance Cost of the U.S. Individual Income Tax System.”National Tax Journal (December) 37, 461–474.

    Google Scholar 

  13. Slemrod, Joel, and Shlomo Yitzhaki. (1987). “The Optimal Size of a Tax Collection Agency.”Scandinavian Journal of Economics (September) 89, 183–192.

    Google Scholar 

  14. Tanzi, Vito, and Milka Casanegra de Jantscher. (1989). “The Use of Presumptive Income in Modern Income Tax Systems.” In Aldo Chiancone and Kenneth Messere (eds.),Change in Revenue Structures: Proceedings of the 42nd Annual Congress of the International Institute of Public Finance held in Athens, Greece, 1986. Detroit: Wayne State University Press.

    Google Scholar 

  15. Usher, Dan. (1986). “Tax Evasion and the Marginal Cost of Public Funds.”Economic Inquiry (October) 24, 563–586.

    Google Scholar 

  16. Wilson, John D. (1989). “On the Optimal Tax Base for Commodity Taxation.”American Economic Review (December) 79, 1196–1206.

    Google Scholar 

  17. Yitzhaki, Shlomo. (1979). “A Note on Optimal Taxation and Administrative Cost.”American Economic Review (June) 69, 475–480.

    Google Scholar 

Download references

Author information

Affiliations

Authors

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Slemrod, J., Yitzhaki, S. Analyzing the standard deduction as a presumptive tax. Int Tax Public Finan 1, 25–34 (1994). https://doi.org/10.1007/BF00874087

Download citation

Key words

  • taxation
  • horizontal equity
  • compliance costs