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It's all about tax rates: An empirical study of tax perception

  • Blaufus, Kay
  • Bob, Jonathan
  • Hundsdoerfer, Jochen
  • Kiesewetter, Dirk
  • Weimann, Joachim

In this paper we apply conjoint analysis to study the influence of changes in the tax rate and the tax base on the perceived tax burden. Our results show that the majority of individuals do not make rational tax decisions based on the actual tax burden, but rather use simple decision heuristics. This leads to the importance of the tax rate being significantly overestimated and the importance of the tax base being significantly underestimated. Furthermore we determine framing effects and show that under specific assumptions, a rise in the actual tax burden can lead to a electoral success.

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Paper provided by arqus - Arbeitskreis Quantitative Steuerlehre in its series arqus Discussion Papers in Quantitative Tax Research with number 106.

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Date of creation: 2010
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Handle: RePEc:zbw:arqudp:106
Contact details of provider: Web page: http://www.arqus.info/

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  1. Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
  2. Thiess Buettner & Martin Ruf, 2007. "Tax incentives and the location of FDI: Evidence from a panel of German multinationals," International Tax and Public Finance, Springer, vol. 14(2), pages 151-164, April.
  3. Fujii, Edwin T & Hawley, Clifford B, 1988. "On the Accuracy of Tax Perceptions," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 344-47, May.
  4. Eckel, Catherine C. & Grossman, Philip J. & Johnston, Rachel M., 2005. "An experimental test of the crowding out hypothesis," Journal of Public Economics, Elsevier, vol. 89(8), pages 1543-1560, August.
  5. Rupert Sausgruber & Jean-Robert Tyran, . "Testing the Mill hypothesis of fiscal illusion," Discussion Papers 04-18, University of Copenhagen. Department of Economics, revised Sep 2004.
  6. Haufler, Andreas & Schjelderup, Guttorm, 2000. "Corporate Tax Systems and Cross Country Profit Shifting," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 306-25, April.
  7. Brannas, Kurt & Karlsson, Niklas, 1996. "Estimating the perceived tax scale within a labor supply model," Economics Letters, Elsevier, vol. 52(1), pages 75-79, July.
  8. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  9. de Bartolome, Charles A.M., 1991. "Which Tax Rate Do People Use: Average or Marginal?," Working Papers 91-49, C.V. Starr Center for Applied Economics, New York University.
  10. Arrazola, Maria & de Hevia, Jose & Sanz, Jose F., 2000. "More on tax perception and labour supply: the Spanish case," Economics Letters, Elsevier, vol. 67(1), pages 15-21, April.
  11. Rachel Griffith & Alexander Klemm, 2004. "What has been the tax competition experience of the past 20 years?," IFS Working Papers W04/05, Institute for Fiscal Studies.
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