Public Provision of Private Goods,Self‐Selection,and Income Tax Avoidance |
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| Authors: | Sören Blomquist Vidar Christiansen Luca Micheletto |
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| Affiliation: | 1. Uppsala Center for Fiscal Studies at Uppsala University, Uppsala, Sweden;2. University of Oslo, Blindern, Norway;3. University of Milan, Milan, Italy |
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| Abstract: | Redistributive taxation should benefit those with low earnings capacity rather than those who choose a lower income to obtain tax savings. Several contributions have highlighted how public provision of work complements can discourage people from lowering labor supply to diminish taxable income. We show how tax avoidance, previously neglected, can alter the conclusions regarding public provision. Tax avoidance breaks the link between labor supply and reported income. An agent reducing his reported income to escape taxes might no longer forego a publicly provided labor complement, because he can now lower his income by avoiding more rather than working less. |
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| Keywords: | Income misreporting optimal nonlinear income tax tax avoidance H21 H26 H42 |
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