Decision heuristics and tax perception – An analysis of a tax-cut-cum-base-broadening policy

Kay Blaufus, Jonathan Bob, Jochen Hundsdoerfer, Dirk Kiesewetter and Joachim Weimann

Journal of Economic Psychology, 2013, vol. 35, issue C, 1-16

Abstract: In this paper, both a conjoint analysis and a lab experiment are conducted to analyze the influence of changes in the tax rate and the tax base on the perceived tax burden. Our results show that the majority of individuals do not make rational tax decisions based on the actual tax burden but rather use simple decision heuristics. This leads to an irrationally high impact of changes in nominal tax rates on the perceived tax burden. Taxpayers favor tax options that apply a lower tax rate on their gross income over a higher tax rate applied on their net income despite the lower actual tax burden of the latter option. This result suggests that politicians could combine increasing fiscal revenues and decreasing subjects’ tax perception. Furthermore, overestimation of tax rate changes increases considerably when information on tax rate is considered first (framing effect).

Keywords: Behavioral public finance; Decision heuristics; Framing effects; Perceived tax burden; Tax-cut-cum-base-broadening (search for similar items in EconPapers)
JEL-codes: D03 G11 H20 H30 K34 M41 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joepsy:v:35:y:2013:i:c:p:1-16

DOI: 10.1016/j.joep.2012.12.004

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