Introductory Tax Models

  • András SimonovitsEmail author


This chapter presents two introductory tax models. Section 2.2 discusses intragenerational redistribution with flexible labor supply. There are at least two types of workers, differing in productivities. Their labor supply is flexible and a flat basic income is financed from a proportional tax system which diminishes inequalities. Total redistribution is destructive but depending on the strength of labor disutility, a well-chosen tax rate can eliminate the worst inequalities. Section 2.3 analyzes redistribution with tax morale, where workers pay taxes to finance a basic income. Depending on their exogenously given tax morale, they underreport their true earnings more or less. In the socially optimal tax system, the stronger the tax morale, the higher (rather than the lower) the tax rate.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alesina, A., & Angeletos, G. M. (2005). Fairness and Redistribution. American Economic Review, 95, 960–980.CrossRefGoogle Scholar
  2. Allingham, M., & Sandmo, A. (1972). Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics, 1, 323–338.CrossRefGoogle Scholar
  3. Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax Compliance. Journal of Economic Literature, 36, 818–860.Google Scholar
  4. Blanchard, O. (2004). The Economic Future of Europe. Journal of Economic Perspectives, 18(4), 3–26.CrossRefGoogle Scholar
  5. Chetty, R. (2009). Is Taxable Income Elasticity Sufficient to Calculate Deadweight Loss? The Implications of Evasion and Avoidance. American Economic Journal: Economic Policy, 1(1), 31–52.Google Scholar
  6. Diamond, P. A., & Saez, E. (2011). The Case for a Progressive Tax: From Basic Research to Policy Prescriptions. Journal of Economic Perspectives, 23(4), 165–190.CrossRefGoogle Scholar
  7. Doerrenberg, P., Duncan, D., Fuest, C., & Peichl, A. (2012). Nice Guys Finish Last: Are People with Higher Tax Morale Taxed More Heavily? (IUA Discussion Paper 6275).Google Scholar
  8. Feldstein, M. (1999). Tax Avoidance and the Deadweight Loss of the Income Tax. Review of Economics and Statistics, 81, 674–680, full text: NBER Working Paper 5055, 1996.CrossRefGoogle Scholar
  9. Frey, B. S., & Weck-Hannemann, H. (1984). The Hidden Economy as an ‘Unobserved’ Variable. European Economic Review, 26, 33–53.CrossRefGoogle Scholar
  10. Garay, B., Simonovits, A., & Tóth, J. (2012). Local Interaction in Tax Evasion. Economic Letters, 111, 412–415.CrossRefGoogle Scholar
  11. Kleven, H. J., Knudsen, M. B., Kreiner, C. T., Pedersen, S., & Saez, E. (2011). Unwilling or Unable to Cheat? Evidence from a Randomized Tax Audit Experiment. Econometrica, 79, 651–692.CrossRefGoogle Scholar
  12. Luttmer, E. F. P., & Singhal, M. (2014). Tax Morale. Journal of Economic Perspectives, 28(4), 149–168.CrossRefGoogle Scholar
  13. Méder, Z., Simonovits, A., & Vincze, J. (2012). Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality. Economic Analysis and Policy, 42, 171–188.CrossRefGoogle Scholar
  14. Mirrlees, J. A. (1971). An Exploration in the Theory of Optimum Income Taxation. Review of Economic Studies, 38, 175–208.CrossRefGoogle Scholar
  15. Prescott, E. C. (2004). Why Do Americans Work so Much More Than Europeans. Federal Reserve Bank of Minneapolis, Quarterly Review, 28(1), 2–13.Google Scholar
  16. Ravaillon, M. (1997). Measuring Social Welfare with or Without Poverty Lines. American Economic Review Paper and Proceedings, 84, 359–364.Google Scholar
  17. Sandmo, A. (1981). Income Tax Evasion. Journal of Public Economics, 16, 265–288.CrossRefGoogle Scholar
  18. Sandmo, A. (2012). An Evasive Topic: Theorizing About the Hidden Economy. International Tax and Public Finance, 19, 5–24.CrossRefGoogle Scholar
  19. Sheshinski, E. (1972). Optimal Linear Income Tax. Review of Economic Studies, 39, 297–302.CrossRefGoogle Scholar
  20. Simonovits, A. (2013). Does Higher Tax Morale Imply a Higher Optimal Labor Income Tax Rate? Danube (Law and Economics), 5, 97–114.Google Scholar
  21. Slemrod, J., & Gilltzer, Ch. (2014). Insights from a Tax-Systems Perspectives. CESifo Economic Studies, 60, 1–31.CrossRefGoogle Scholar
  22. Yitzaki, S. (1974). Income Tax Evasion: A Theoretical Analysis. Journal of Public Economics, 3, 201–202.CrossRefGoogle Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.Hungarian Academy of SciencesBudapestHungary

Personalised recommendations