Tax affinity hypothesis: Do we really hate paying taxes?

Iwan Djanali and Damien Sheehan-Connor ()

Journal of Economic Psychology, 2012, vol. 33, issue 4, 758-775

Abstract: This paper proposes and evaluates the tax affinity hypothesis claiming that individuals derive non-negligible utility from paying taxes due to their pro-social tendencies. We present a model in the neoclassical labor–leisure framework with tax paid as a third argument of the utility function. The Slutsky-like equations derived from this model suggest two testable hypotheses that differentiate it from the standard model. A controlled experiment provides support for the two testable propositions of the hypothesis: (1) subjects worked more in the presence of tax than in its absence at the same net wage rate, and (2) the impact of wage changes on labor supply depended not only on the after-tax wage rate, but also on the tax rate. The tax affinity hypothesis has important implications for tax policy and economic analysis.

Keywords: Taxation; Experimental economics; Altruism; Pro-social behavior (search for similar items in EconPapers)
JEL-codes: C61 C91 D03 H20 J22 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:33:y:2012:i:4:p:758-775

DOI: 10.1016/j.joep.2012.02.004

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