Working Paper: NBER ID: w4631
Authors: Louis Kaplow
Abstract: The complexity of the income tax is an unending source of complaint. Compliance costs have received increasing attention and are estimated to be large. Yet most recognize that some degree of complexity is necessary if ability to pay is to be measured accurately. This article presents a framework for analyzing the value of greater accuracy in income taxation. Formulations for both distributive and incentive benefits of accuracy are offered. The question whether taxpayers have excessive or inadequate incentives to acquire information about taxable income and to challenge tax assessments is also examined.
Keywords: income tax; tax complexity; compliance costs; taxpayer behavior
JEL Codes: H24; H26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax complexity (H26) | compliance costs (Q52) |
| tax complexity (H26) | taxpayer incentives to acquire information about taxable income (H26) |
| accuracy in income taxation (H26) | distribution of after-tax income (D31) |
| accuracy in income taxation (H26) | tax equity (H23) |
| accuracy in income taxation (H26) | economic distortions (H31) |
| accuracy in income taxation (H26) | labor-leisure distortions (H31) |