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Inattention and the Taxation Bias

Author

Listed:
  • Jérémy BOCCANFUSO

    (Paris School of Economics; EHESS.)

  • Antoine FEREY

    (CREST; Ecole Polytechnique.)

Abstract

This paper studies how information frictions in agents’ tax perceptions affect the design of actual tax policy. Developing a positive theory of tax policy, we show that agents’ inattention interacts with policymaking and induces the government to implement inefficiently high tax rates: this is the taxation bias. We quantify the magnitude of this policy distortion for the US economy. Overall, our findings suggest that existing information frictions – and thereby tax complexity – lead to undesirable, large and regressive tax increases.

Suggested Citation

  • Jérémy BOCCANFUSO & Antoine FEREY, 2019. "Inattention and the Taxation Bias," Working Papers 2019-16, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2019-16
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    References listed on IDEAS

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    6. Philippe Aghion & Maxime Gravoueille & Matthieu Lequien & Stefanie Stantcheva, 2017. "Tax Simplicity or Simplicity of Evasion? Evidence from Self-Employment Taxes in France," NBER Working Papers 24049, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Blesse, Sebastian & Buhlmann, Florian & Doerrenberg, Philipp, 2019. "Do people really want a simple tax system? Evidence on preferences towards income tax simplification," ZEW Discussion Papers 19-058, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Optimal taxation; inattention.;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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