Working Paper: NBER ID: w30151
Authors: Ashley C. Craig; Joel Slemrod
Abstract: We provide a unified analysis of taxation and taxpayer education when individuals have an incomplete understanding of a complex tax system. The analysis is independent of whether income is earned legitimately, or by avoiding or evading taxes. In this sense, learning about tax minimization strategies (tax manipulation) is similar to learning about the tax code. The government in our model balances a trade-off: A better understanding of the tax system potentially allows taxpayers to optimize more effectively, but also affects government revenue. Optimal taxpayer education and the optimal amount of redistribution can both be characterized ex post by aggregate sufficient statistics that do not require information about how biases or behavioral responses vary across the decision margins.
Keywords: tax knowledge; tax manipulation; taxpayer education; optimal taxation
JEL Codes: H21; H26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Education (I29) | Optimization of tax liabilities (H21) |
| Optimization of tax liabilities (H21) | Government revenue (H27) |
| Education (I29) | Government revenue (H27) |