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A Theoretical Note on Tax Evasion: The Case of the American FairTax Plan
Department of Finance, Auburn University, Auburn, USA
Department of Economics and Center for the Study of Public Choice, George Mason University, Fairfax, USA
College of Business, Lewis University, Romeoville, USA
- 1 Department of Finance, Auburn University, Auburn, USA
- 2 Department of Economics and Center for the Study of Public Choice, George Mason University, Fairfax, USA
- 3 College of Business, Lewis University, Romeoville, USA
Theoretical Economics Letters·Volume 12 (2022)·Pages 392–399·Published 4 March 2022·DOI10.4236/tel.2022.122020
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Abstract
Issues that occur with any tax system involve the incentives and disincentives of individuals to evade the tax. This theoretical note investigates how risk preferences could affect tax evasion under the proposed FairTax. We develop a constrained utility-maximization framework to examine how individual s with different risk preferences could respond to a broad-based sales tax based on the costs associated with tax evasion.
KeywordsTax EvasionFairTax
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