Tax affinity hypothesis: Do we really hate paying taxes?
AbstractThis 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.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 33 (2012)
Issue (Month): 4 ()
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Taxation; Experimental economics; Altruism; Pro-social behavior;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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