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TAX AVERSION AND THE LAFFER CURVE *

TAX AVERSION AND THE LAFFER CURVE * ROGERN . W A U D University of North Carolina, Chapel Hill, National Bureau of Economic Research In recent years there has been a growing concern that tax rates in industrialised countries are so high that they may actually yield less tax revenue than that otherwise realised at lower tax rates. This point of view has been stylised by “supply-siders” who argue that the economy is on the negatively sloped portion of the tax rate-tax revenue relationship often referred to as the Laffer curve. However examination of this argument in contexts which have a distinct supply-side orientation have provided little, if any, support for this viewpoint (see Shaller 1983 and Fullerton 1982, for example). The purpose of this paper is to show that when tax aversion, which encompasses both tax avoidance (the legal use of tax loopholes) and tax evasion (the illegal underreporting of income), is explicitly taken into account positions along the negatively sloped portion of the Laffer curve seem to be a more realistic possibility. Such a finding warrants concern, and further study, given that tax avoidance has spawned a veritable industry of tax attorneys and accountants, and given that tax evasion appears to be significant http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scottish Journal of Political Economy Wiley

TAX AVERSION AND THE LAFFER CURVE *

Waud, Roger N.
Scottish Journal of Political Economy , Volume 33 (3) – Aug 1, 1986
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References (27)

Publisher
Wiley
Copyright
Copyright © 1986 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0036-9292
eISSN
1467-9485
DOI
10.1111/j.1467-9485.1986.tb00827.x
Publisher site
See Article on Publisher Site

Abstract

ROGERN . W A U D University of North Carolina, Chapel Hill, National Bureau of Economic Research In recent years there has been a growing concern that tax rates in industrialised countries are so high that they may actually yield less tax revenue than that otherwise realised at lower tax rates. This point of view has been stylised by “supply-siders” who argue that the economy is on the negatively sloped portion of the tax rate-tax revenue relationship often referred to as the Laffer curve. However examination of this argument in contexts which have a distinct supply-side orientation have provided little, if any, support for this viewpoint (see Shaller 1983 and Fullerton 1982, for example). The purpose of this paper is to show that when tax aversion, which encompasses both tax avoidance (the legal use of tax loopholes) and tax evasion (the illegal underreporting of income), is explicitly taken into account positions along the negatively sloped portion of the Laffer curve seem to be a more realistic possibility. Such a finding warrants concern, and further study, given that tax avoidance has spawned a veritable industry of tax attorneys and accountants, and given that tax evasion appears to be significant

Journal

Scottish Journal of Political Economy – Wiley

Published: Aug 1, 1986

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