Discriminatory Taxes are Unpopular - Even When They are Efficient and Distributionally Fair

33 Pages Posted: 2 Dec 2013

See all articles by Rupert Sausgruber

Rupert Sausgruber

Vienna University of Economics and Business - Department of Economics

Jean-Robert Tyran

University of Vienna; University of Copenhagen - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2013

Abstract

We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of two tax regimes to raise a given tax revenue. A “uniform tax” (UT) imposes the same tax rate on all markets and is fair in that it yields the same – but low – income to participants in all markets. The “discriminatory tax” (DT) imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets. We find that DT are unpopular, as predicted. Surprisingly, however, DT remain unpopular when they are both efficient and produce a fair (equal) distribution. We conclude that non-discrimination (equal treatment) is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution.

Keywords: taxation, behavioral public economics, voting, efficiency, fairness

JEL Classification: C92, H21, D72

Suggested Citation

Sausgruber, Rupert and Tyran, Jean-Robert, Discriminatory Taxes are Unpopular - Even When They are Efficient and Distributionally Fair (November 2013). WU International Taxation Research Paper Series No. 2013 - 08. Available at SSRN: https://ssrn.com/abstract=2362382 or http://dx.doi.org/10.2139/ssrn.2362382

Rupert Sausgruber (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Welthandelsplatz 1
Vienna, 1020
Austria
+43 1 31336 4572 (Phone)

Jean-Robert Tyran

University of Vienna ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

HOME PAGE: http://homepage.univie.ac.at/jean-robert.tyran/

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 353 23 027 (Phone)

HOME PAGE: http://www.econ.ku.dk/tyran/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
101
Abstract Views
555
rank
214,301
PlumX Metrics