Enhancement of cooperation induced by taxation mechanism with progressive tax rates in spatial public goods games

Abstract

Taxation mechanism functions as a potent regulatory tool to impact economic activity and income distribution through the adjustment of tax rates and policies. In this paper, a three-tiered tax structure with progressive tax rates is proposed to the spatial public goods game, in which players' taxes are collected at varying tax rates based on the payoffs within different ranges. And a preferential measure is implemented to alleviate the tax burden on cooperators and incentivize them to make contribution. Through investigating the different combinations of tax rates, it reveals that imposing high taxes on the middle-income players fosters the emergence of cooperation and heavy taxes on the high-income players is instrumental in achieving full cooperation. However, oppressive taxation is not optimal for individual benefit as payoff is negatively impacted by the burden. To achieve full cooperation and high payoff in the case of weak synergy effect, it is advisable to levy light taxes on the middle-income and heavy taxes on the high-income. Finally, tax redistribution is studied and two schemes are applied to the taxation mechanism, finding that the local distribution can foster the evolution of cooperation more effectively than the global one, and the latter achieves a comparable promotion effect as the mechanism without tax redistribution.