Behavioral Public Finance: Tax Design as Price Presentation

International Tax and Public Finance, Policy Watch, 10, 189–203, 2003

15 Pages Posted: 21 Jan 2015

See all articles by Aradhna Krishna

Aradhna Krishna

University of Michigan, Stephen M. Ross School of Business

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business; National Bureau of Economic Research (NBER)

Date Written: 2003

Abstract

In this essay we review the evidence from marketing research about price presentation of consumer products and discuss how these lessons have been applied — consciously or unconsciously — in the design of the U.S. tax system. Our perspective is that, in most situations, the designers of the tax system attempt to minimize the perceived burden of any given amount of tax collections. We allow, though, that in certain situations an additional goal is to maximize the perceived burden of others. We also investigate how, when the objective is to encourage a particular activity, price presentation may enhance the achievement of that goal for a given amount of tax subsidy. We conclude by addressing the ethical and normative implications of price presentation in the tax system.

Suggested Citation

Krishna, Aradhna and Slemrod, Joel B., Behavioral Public Finance: Tax Design as Price Presentation (2003). International Tax and Public Finance, Policy Watch, 10, 189–203, 2003. Available at SSRN: https://ssrn.com/abstract=2552250

Aradhna Krishna (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Joel B. Slemrod

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Room R5396
Ann Arbor, MI 48109-1234
United States
734-936-3914 (Phone)
734-763-4032 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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