The theory of taxation in literature

They rely on what has been labeled the revelation principle where planners must implement a tax system that provides proper incentives for people to reveal their true wage-earning abilities.

This imposes incentive compatibility constraints that limit the taxes which the government is able to levy, and prevents it from taxing high-productivity people at higher rates than low-productivity people.

They rely on what has been labeled the revelation principle where planners must implement a tax system that provides proper incentives for people to reveal their true wage-earning abilities.

In this same example, if one individual chooses to spend his income to support his family, and another to travel, each individual now has less money to pay taxes with.

Optimal tax

Conversely, this situation can also support the opposite argument. Equilibrium is reached at point P on a voluntary-exchange basis. Because it is widely agreed upon that those of higher incomes should pay more in taxes, this helps alleviate the tax burden on those whose ability to pay is lower.

Tax Rules", where they discuss marginal tax rate schedules for labor income. The intersection of the cost and demand curves at B determines how a given national income should according to taxpayers' desires be divided between social and private goods; hence, there should be OE social goods and EX private goods.

Raising taxes will discourage labour supply, and this will lead to lower tax revenue as a result; so for a tax increase, this is negative.

So it is up to individual societies to determine what tax structure to implement. Third, it combines the three discussions: Sixth, goods produced should only be taxed as a final good and should be taxed uniformly, which leads to their seventh point that capital should also not be taxed because it is considered an input of production.

Yet, because it is difficult to see tangible results of deadweight loss, policy makers largely ignore it. A lump-sum tax is a fixed tax that must be paid by everyone and the amount a person is taxed remains constant regardless of income or owned assets.

However, problems immediately arise with vertical equity because not only do policy makers have to define what having a higher ability means, but they also have to determine what an appropriate increase in taxation is for those with a greater ability to pay.

Third, it combines the three discussions: Second, they express their theory in more simplified terms which incurs a loss of realistic application.

For a tax increase, this is positive. They recognize that with every tax, there is some sort of price distortion, so they state that any solution can only be the second-best option and any solution proposed is under that added constraint.

The welfare effect is the effect that the tax change has on the social welfare function by changing individual's utilities. First, it deals with quasi-optimal pricing, looking at four options for Pareto optimality with adjusted commodity prices.

However, their theory differs from other literature in this topic. These questions can be analyzed through horizontal and vertical equity which are subsets of the ability-to-pay principle. For lower-income working people, who spend most of their income, taxes on consumption also have a significant disincentive effect; while higher-income people may be motivated more by prestige and professional achievement than by after-tax income.

use of theory enhances understanding of the major factors that affect a phenomenon, this deficiency has left the tax literature without a meaningful convergence on the key determinants. Third, aggregate analysis showed that attitudinal, normative and subjective control variables were on the overall good predictors of tax compliance.

THE PURE THEORY OF TAXATION 47 Either (C) the mobility of capital and labour l is not taken account of, or (c) exists and is taken account of.

Either (D) the taxation. In this paper, we present a review of tax research. We survey four main areas of the literature: (1) the informational role of income tax expense reported for financial accounting, (2) corporate tax avoidance, (3) corporate decision-making including investment, capital structure, and organizational form, and (4) taxes and asset pricing.

The standard theory of optimal taxation posits that a tax system should be chosen to maximize a social welfare function subject to a set of constraints. The literature on optimal taxation typically treats the social planner as a utilitarian: that is, the social welfare function is based on the utilities of individuals in the society.

In modern public-finance literature, there have been two main issues: who can pay and who can benefit (Benefit principle).

Theories of taxation

Influential theories have been the ability theory presented by Arthur Cecil Pigou and the benefit theory developed by Erik Lindahl. There is a later version of the benefit theory known as the "voluntary exchange" theory. Economic Growth and the Role of Taxation Prepared for the OECD Gareth D.

Optimal tax

Myles The development of endogenous growth theory has provided many new insights into the sources of economic growth. The essence of the new theory is that growth is a consequence of rational economic decisions.

The economic literature contains an.

Theories of taxation The theory of taxation in literature
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