The paper studies the popular hypothesis that ”hiding” taxes from taxpayers, such as by nominally dividing the payroll tax between employees and employers, leads to higher taxes. To test the hypothesis, I analyze payroll taxes and pension spending in a sample of 89 countries and find that countries where employers nominally pay a higher share of the payroll tax tend to have lower taxes and smal...

We develop a model for determining the optimal high income linear tax rate when there exist imperfectly substitutable types of labor. If one type is disproportionately prevalent among higher income taxpayers, then wages adjust in response to more progressive taxation and part of the statutory tax burden is shifted to lower income taxpayers. Our derivation is expressed in terms of readily interp...

We generalize the classic Allingham and Sandmo’s model of tax evasion considering heterogeneous agents with different degrees of tax morale and matchable, as opposed to non-matchable, income. The Tax Agency evolves its control scheme, maximizing the revenues from fines, and takes into account some minimal information on the taxpayers. We compare different audit policies and find that the most e...

This paper describes the development of the Individual Reporting Compliance Model (IRCM), an agent-based model for simulating tax reporting compliance in a community of 85,000 U.S. taxpayers. Design features include detailed tax return characteristics, taxpayer learning, social networks, and tax agency enforcement measures. The taxpayer's compliance reporting decision is modeled as a partially ...

We set up a two-country, regional model of trade in financial services. Competitive firms in each country manufacture untraded consumer goods in an uncertain productive environment, borrowing funds from a bank in either the home or the foreign market. Duopolistic banks can choose their levels of monitoring of firms and thus the levels of risk-taking, where the risk of bank failure is partly bor...

Tax compliance has been studied in economics by analysing the individual decision of a representative person between paying and evading taxes. A neglected aspect of tax compliance is the interaction of taxpayers and tax authorities. The relationship between the two actors can be understood as an implicit or "psychological" contract. Studies on tax evasion in Switzerland show that the more stron...

M eeting the educational demands of the future will be expensive; however, in most states, public schools from kindergarten through the university level already experience budgetary challenges. Policymakers in many states face the challenge of motivating taxpayers to provide the funds required to meet mounting educational needs. Taxpayers who do not have children in public school may question w...