Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/73639
Authors: 
Brunner, Johann K.
Eckerstorfer, Paul
Pech, Susanne
Year of Publication: 
2010
Series/Report no.: 
Working Paper, Department of Economics, Johannes Kepler University of Linz 1004
Abstract: 
This article incorporates tax evasion into an optimum taxation framework with individuals differing in earning abilities and initial wealth. We find that despite the possibility of its evasion a tax on initial wealth should supplement the optimal nonlinear income tax, given a positive correlation between initial wealth and earning abilities. Further, even if income and initial wealth are taxed optimally, it is still desirable to levy a tax on commodities, though it can be evaded as well. Thus, our result provides a rationale for a comprehensive tax system. Optimal tax rates on commodities differ in general, however for the special case of a uniform evasion technology it turns out that equal rates are optimal if preferences are homothetic and weakly separable.
Subjects: 
Optimal Taxation
Tax Evasion
JEL: 
D82
H21
H24
H26
Document Type: 
Working Paper

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