Progressive taxation and tax morale

Abstract

Due to strong evidence indicating that tax morale affects actual tax-paying behavior, finding the determinants of tax morale could help both to understand and to fight tax evasion. In this paper we analyze the effect of progressive taxation on individual tax morale using a cross-country approach—a research question that has not been investigated in the existing literature. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the positive impact of tax progressivity on tax morale declines with income. In our empirical analysis we make use of a unique dataset of tax progressivity measures, namely the World Tax Indicators, and follow most of the tax morale literature by employing the World Values Survey to measure individual tax morale. Controlling for a wide range of potential confounders, we are able to confirm both hypotheses in our empirical analysis.

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Correspondence to Andreas Peichl.

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Doerrenberg, P., Peichl, A. Progressive taxation and tax morale. Public Choice 155, 293–316 (2013). https://doi.org/10.1007/s11127-011-9848-1

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Keywords

  • Tax morale
  • Tax compliance
  • Progressivity
  • Taxation
  • Redistribution

JEL Classification

  • H26
  • H24
  • D7
  • D31