TITLE:
A Theoretical Note on Tax Evasion: The Case of the American FairTax Plan
AUTHORS:
James R. Barth, Richard J. Cebula, Yinan Ni
KEYWORDS:
Tax Evasion, FairTax
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.2,
March
31,
2022
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 individuals with different
risk preferences could respond to a broad-based sales tax based on the costs
associated with tax evasion.