Fiscal illusion at the individual level

Kaetana Numa ()
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Kaetana Numa: King’s College London

Public Choice, 2025, vol. 203, issue 1, No 6, 105-137

Abstract: Abstract This study uses a survey experiment to test for fiscal illusion—the idea that taxpayers systematically misperceive their tax liabilities and contributions to public services. To date, the voluminous literature on fiscal illusion has not analyzed how better information on personalized total tax liabilities and contributions to public services would influence fiscal preferences. This is the first study to inform participants of their individual fiscal balance sheets comprising all major taxes regularly paid by taxpayers and their allocation to public services, thus comprehensively covering both sides of the fiscal account. This aim is achieved by embedding a novel personalized fiscal calculator in an online survey experiment administered to a representative sample of UK employees. The experiment finds evidence of fiscal illusion: providing personalized fiscal information reduces support for higher taxes and spending and increases support for lower taxes and spending. These findings indicate that taxpayers underestimate both their tax liabilities and the costs of public services.

Keywords: Fiscal illusion; Tax perception; Tax preferences; Public spending preferences; Information; Survey experiment (search for similar items in EconPapers)
JEL-codes: C93 D72 D83 H24 H5 P16 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:203:y:2025:i:1:d:10.1007_s11127-024-01187-9

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DOI: 10.1007/s11127-024-01187-9

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