The perception of income taxation on risky investments: An experimental analysis of different methods of loss compensation
We analyze the effect of income taxation with limited loss deduction on investment decisions. An experiment with five treatments was conducted, one without taxation as a reference and four with taxation and limited loss compensation. The participants' task was to repeatedly choose one out of two risky investment opportunities. Earnings from the experiment depended on the payoffs of the participant's investments. Our results reveal that subjects do not only look at gross payoffs but also take taxes into account in their decisions. The experimental setup made sure that a rational participant who correctly perceives the effect of the different loss offset rules would take exactly the same decisions with and without taxation. Nevertheless, we find out that individuals tend to overestimate the value of loss compensation rules which offer less than a complete loss offset.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.arqus.info/|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rupert Sausgruber & Jean-Robert Tyran, 2009.
"Tax Salience, Voting, and Deliberation,"
NRN working papers
2009-25, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
- Rupert Sausgruber & Jean-Robert Tyran, 2008. "Tax Salience, Voting, and Deliberation," Discussion Papers 08-21, University of Copenhagen. Department of Economics.
- Rupert Sausgruber & Jean-Robert Tyran, 2008. "Tax Salience, Voting, and Deliberation," Working Papers 2009-25, Faculty of Economics and Statistics, University of Innsbruck.
- 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.
- Jeremy Clark, 2002. "House Money Effects in Public Good Experiments," Experimental Economics, Springer, vol. 5(3), pages 223-231, December.
- Lucy F. Ackert & Narat Charupat & Bryan K. Church & James Tompkins & Richard Deaves, 2003.
"An experimental examination of the house money effect in a multi-period setting,"
FRB Atlanta Working Paper
2003-13, Federal Reserve Bank of Atlanta.
- Lucy Ackert & Narat Charupat & Bryan Church & Richard Deaves, 2006. "An experimental examination of the house money effect in a multi-period setting," Experimental Economics, Springer, vol. 9(1), pages 5-16, April.
- Rupert Sausgruber & Jean-Robert Tyran, 2005.
"Testing the Mill hypothesis of fiscal illusion,"
Springer, vol. 122(1), pages 39-68, January.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Ruffle, Bradley J., 2005. "Tax and subsidy incidence equivalence theories: experimental evidence from competitive markets," Journal of Public Economics, Elsevier, vol. 89(8), pages 1519-1542, August.
- Schmidt, Ulrich & Traub, Stefan, 2002. " An Experimental Test of Loss Aversion," Journal of Risk and Uncertainty, Springer, vol. 25(3), pages 233-49, November.
- Peter Brooks & Horst Zank, 2005. "Loss Averse Behavior," Journal of Risk and Uncertainty, Springer, vol. 31(3), pages 301-325, December.
When requesting a correction, please mention this item's handle: RePEc:zbw:arqudp:92. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.