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A taste for taxes: Minimizing distortions using political preferences

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  • Huet-Vaughn, Emiliano
  • Robbett, Andrea
  • Spitzer, Matthew

Abstract

We conduct an experiment with online workers to assess whether the distortionary effect of a tax is sensitive to the ideological match between taxpayer and tax expenditures. We find that, among self-identified political moderates, the labor supply elasticity with respect to the net of tax wage is significantly smaller when individuals pay taxes to a favored government agency as compared to an unfavored one. While the tax has a significant distortionary effect in the latter case, with a point estimate for the labor supply elasticity of approximately 0.77, the elasticity point estimate is close to zero when taxes go to a favored agency. There is also an increase in total output for the matched population among moderates. There is no evidence that these effects hold for self-identified liberals or conservatives.

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  • Huet-Vaughn, Emiliano & Robbett, Andrea & Spitzer, Matthew, 2019. "A taste for taxes: Minimizing distortions using political preferences," Journal of Public Economics, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:pubeco:v:180:y:2019:i:c:s0047272719301161
    DOI: 10.1016/j.jpubeco.2019.104055
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    Cited by:

    1. Brad C. Nathan & Ricardo Perez-Truglia & Alejandro Zentner, 2020. "My Taxes are Too Darn High: Why Do Households Protest their Taxes?," NBER Working Papers 27816, National Bureau of Economic Research, Inc.
    2. Lu, Kelin, 2022. "Overreaction to capital taxation in saving decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).

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    More about this item

    Keywords

    Taxes; Labor supply; Efficiency cost of taxation; Experiment; Political preferences; Ideology; Distortion; Expenditures;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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