Household Tax Evasion

Household members share public goods and make intra-household transfers. We show how these features of the household interact with the tax evasion decision, and identify the dimensions in which household evasion di ers from individual evasion. In the model we present two members of a household choose how much to contribute to a household public good and how much self-employment income to evade. We are interested in how di erent evasion possibilities interact with the contribution decisions to the household public good and the role of income transfers within the household. We show the household evasion decision di ers from the indi- vidual decision because it a ects the outcome of the household contribution game. When household members are taxed as individuals neutrality applies when choices are not constrained. If the evasion level of one house- hold member is constrained then an income transfer can generate a Pareto improvement. When the household members are jointly taxed there is a couple constraint on strategies and corner solutions can emerge