An income tax withholding model
Pervasiveness of overpayment
Bibliographic Data
| ID | 20201686 |
|---|---|
| Authors | Duncan Lien (0000-0002-0659-2831, The University of Texas at San Antonio), Donald Lien, Pamela C Smith (0000-0001-7215-8091, The University of Texas at San Antonio) |
| Year | 2010 |
| Volume | 22 |
| Issue | 3 |
| Pages | 325-342 |
| Publication date | 2010-03-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Journal of Public Budgeting Accounting & Financial Management (JOURNAL) |
| Journal identifiers | ISSN: 1096-3367 • E-ISSN: 1945-1814 |
| Publisher | Emerald (PUBLISHER) |
| DOI | 10.1108/jpbafm-22-03-2010-b002 |
| OpenAlex | W2774403537 |
| Language | EN |
| References cited | 17 |
The U.S. government mandates taxpayers remit taxes through a "pay as you go" system. Research indicates employees continue to overpay interim taxes, despite the inefficiencies of this form of forced savings. Theory holds that a rational individual would choose the minimum amount of withholdings prescribed by the tax code. We adopted Kahneman-Tversky (1979) prospect theory to show that, under reasonable conditions, individuals will continue to choose excessive withholdings. This paper is not an attempt to statistically justify prospect theory however; we argue that withholdings increase when the income tax rate increases and when beforetax income increases. Our model extends the income tax withholding literature by modeling a framework to determine an optimal withholding decision for taxpayers
Economics · Income tax · Interim · Microeconomics · Prospect theory · Public economics · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Law · Taxation and Compliance Studies
| Highly cited | No |
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