Favouritism towards the poor and a discontinuous tax structure |
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Authors: | H. Sato |
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Affiliation: | Faculty of Economics, Kyushu Sangyo University, Fukuoka, Japan |
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Abstract: | This article aims to theoretically clarify two points. First, even though the government shows favouritism to the poor and wants to exempt low-income taxpayers and to secure the necessary income tax revenue by taxing only high-income taxpayers, the government nevertheless ends up taxing the poor. This is in opposition to favouritism and arises because of the government’s inability to observe the individual taxpayer’s income levels. Second, even without observing each taxpayer’s income level, if favouritism is sufficiently strong, then the government can discontinuously resolve such unintentional taxation. |
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Keywords: | Favouritism optimal income taxation tax evasion Nash equilibrium |
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