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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/46406
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| Title: | | Tax structure and government expenditures under tax equity norms  |
| Authors: | | König, Tobias Wagener, Andreas |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper: Public Finance 3205 |
| Abstract: | | We augment a standard tax model by concerns about tax equity: people get upset when labour is taxed more heavily than capital. Even the slightest concern for tax equity invalidates the common recommendation for small open economies that capital should remain tax-exempt. This holds for exogenous as well as for endogenous government expenditures and irrespective of whether concerns with tax equity only cause emotional discomfort or also impact on work incentives. If concerns with tax equity get more intense, the economy may choose higher taxes on labour and move to the downward sloped part of its Laffer curve. For endogenous government spending, stronger concerns with tax equity may call for a larger size of the public sector. |
| Subjects: | | justice fairness taxation policy mix |
| JEL: | | H20 E62 P16 Z10 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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