Discriminatory taxes are unpopular—Even when they are efficient and distributionally fair

Rupert Sausgruber and Jean-Robert Tyran

Journal of Economic Behavior & Organization, 2014, vol. 108, issue C, 463-476

Abstract: We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of the two tax regimes to raise a given tax revenue. A “uniform tax” (UT) imposes the same tax rate on all markets and is fair in that it yields the same – but low – income to participants in all markets. The “discriminatory tax” (DT) imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets. We find that DT is unpopular, as predicted. Surprisingly, however, DT remains unpopular when they are both efficient and produce a fair (equal) distribution. We conclude that non-discrimination (equal treatment) is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution.

Keywords: Taxation; Behavioral public economics; Voting; efficiency; Fairness (search for similar items in EconPapers)
JEL-codes: C92 D72 H21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Discriminatory Taxes are Unpopular - Even when they are Efficient and Distributionally Fair (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:108:y:2014:i:c:p:463-476

DOI: 10.1016/j.jebo.2013.12.022

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