Keywords
Tax Preferences, Tax Affinity, Labor Income Tax, Taxation, Tax Policy, Opyimal Income Taxation
Abstract
Tax preference focuses on individuals' perception and choice regarding specific tax policies or structure. It examines the extent to which individuals favor certain tax provisions, rates, or exemptions over others. Scholars and researchers have extensively examined tax preference from various perspectives. I performed a numerical exercise on one agent model and two agent model where agents have preferences over consumption, labor supply and tax preferences (dislike of the labor income tax). Under the one agent model there exist one household utility maximization problem and under the two agent model there exist two households with low productive ability and high productive ability. In the one agent model, I find that as the dislike of the labor income tax rises the household consumption, labor supply decrease and the resulting utility decreases. In the two agent model, I find that the behavioral pattern is similar to the one agent model with an exception for the fact that the high ability individual supplies less labor to enjoy more level of consumption than the low ability agent. I also performed a numerical exercise that assumes the two agents have different level of tax preference and the result shows that whether the high productive agent has a higher or lower dislike towards the tax policy than the low productive ability agent, the high productive agent supplies less labor, consume more and has a lower level of dis-utility.
Primary Advisor
Marcelo Arbex
Program Reader
Christian Trudeau
Degree Name
Master of Arts
Department
Economics
Document Type
Major Research Paper
Convocation Year
2024
Included in
Behavioral Economics Commons, Economic Theory Commons, Income Distribution Commons, International Economics Commons, Labor Economics Commons, Macroeconomics Commons, Other Economics Commons, Public Economics Commons