The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment

Martin Fochmann () and Joachim Weimann
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Martin Fochmann: Otto-von-Guericke University Magdeburg

No 6049, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects' income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple at taxes are particularly prone to being misperceived because their simplicity reduces the tax salience.

Keywords: tax experience; tax salience; tax perception; real effort experiment; field experiment; behavioral economics (search for similar items in EconPapers)
JEL-codes: C91 D14 H24 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2011-10
New Economics Papers: this item is included in nep-acc, nep-cbe, nep-exp, nep-hrm and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: FinanzArchiv / Public Finance Analysis, 2013, 69 (4), 511-542

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Related works:
Journal Article: The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment (2013)
Working Paper: The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment (2011)
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