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Antoine FEREY (CREST) – “Optimal Income Taxation and Tax Complexity with Taxpayers Misperceptions”

November 6, 2017, 12:15 pm - 1:30 pm

The Macroeconomics Seminar: Every Monday at 12:15 pm.

Time: 12:15 pm – 1:30 pm
Date: 06th of November 2017
Place: Room 3001.

Antoine FEREY  (CREST) – “Optimal Income Taxation and Tax Complexity with Taxpayers Misperceptions


 We analyze optimal income taxation and tax complexity – defined as the features of a tax system preventing agents from correctly internalizing taxes in their choices – in a Mirrlees economy where agents misperceive taxes. We capture tax complexity along two dimensions – the number of tax instruments and the design (e.g. salience) of each instrument – and demonstrate how these factors shape the overall complexity of an integrated tax system. Tax complexity is a desirable feature of tax systems to the extent that it induces misperceptions which reduce the efficiency costs of taxation and allow an inequality-averse government to increase taxes and redistribution towards poor households. However, misperceptions generate utility misoptimization costs which are heterogeneous across taxpayers: more able workers are relatively more stricken and thus willing to pay more attention to the tax schedule. The possibility to dedicate time and energy to study the tax schedule and to turn to tax advisors give rise to an optimal level of tax complexity that we characterize. Preliminary estimations indicate that the monetary equivalent for internalizing the US income tax system was $2,364 in 2016, whereas our estimate for the optimal level of complexity is around $1,100. Because richest households resort to tax advisors, it is the upper middle class who loses the most from this tremendous complexity.

Joint work : Jeremy BOCCANFUSO (PSE)

 Julien PRAT (CREST )


Address : ENSAE ParisTech  5, avenue Henry Le Chatelier 91120 Palaiseau, How to come?



November 6, 2017
12:15 pm - 1:30 pm
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