EconPapers    
Economics at your fingertips  
 

Tax Simplicity and Heterogeneous Learning

Philippe Aghion, Ufuk Akcigit (), Matthieu Lequien and Stefanie Stantcheva

No 24049, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how strongly individuals respond to tax simplicity and how they learn about the complexities of the tax system. We focus on the self-employed, who can more easily adjust to tax incentives and whose responses directly stem from their own understanding of the tax system. We use new French tax returns data from 1994 to 2012. France serves as a good quasi-laboratory: it has three fiscal regimes – or modes of taxation – for the self-employed, which differ in their monetary tax incentives and in their tax simplicity. Two key features are that, first, these regimes are subject to eligibility thresholds; we find large excess masses (bunching) right below the latter. Second, the regimes impact different agents heterogeneously and have changed extensively over time. Taken together, these two key elements give us measures of tax responses (the bunching) as well as the variation needed to jointly estimate a value of tax simplicity and taxable income elasticities. They also give us an opportunity to study how individuals learn about and respond over time to changing policy parameters. We estimate a large value for tax simplicity of up to 650 euros per year per individual depending on the regime and activity. We also find sizable costs of tax complexity; agents are not immediately able to understand what the right regime choice is, leave significant money on the table, and learn over time. The cost of complexity is “regressive” in that it affects mostly the uneducated, low income, and low skill agents. Agents who can be viewed as more informed and knowledgeable (e.g., the more educated or high-skilled) are more likely to make the correct regime choice and to learn faster.

JEL-codes: H21 H24 H25 H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-pub
Date: 2017-11
Note: LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w24049.pdf (application/pdf)

Related works:
Working Paper: Tax Simplicity and Heterogeneous Learning (2018) Downloads
Working Paper: Tax Simplicity and Heterogeneous Learning (2017) Downloads
Working Paper: Tax Simplicity and Heterogeneous Learning (2017) Downloads
Working Paper: Tax simplicity and heterogeneous learning (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:24049

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w24049

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-10-01
Handle: RePEc:nbr:nberwo:24049