Biased Preferences for Wealth Taxation: The Case of Misperceived Tax Burden Consequences

62 Pages Posted: 1 Jul 2021

See all articles by Malte Chirvi

Malte Chirvi

Humboldt University of Berlin - School of Business and Economics

Hans-Peter Huber

Humboldt University of Berlin - School of Business and Economics

Cornelius Schneider

University of Mannheim; Friedrich-Schiller-Universität Jena

Date Written: June 29, 2021

Abstract

The individual capacity to form personal preferences constitutes an essential element of the democratic process. At the same time, policies with far-reaching consequences often require profound expertise. Taxation is such an example. Due to its complex character, bounded rationality might induce biases causing other outcomes than intended. This paper quantifies shifts in stated preferences for wealth taxation caused by misperceived burden consequences of commonly politically discussed tax parameters: tax allowances and tax rates. For this, we conducted a randomized survey experiment with over 1,200 respondents in Germany. In a 2 by 2 design, our respondents were randomly selected to indicate both their preferred tax allowance and tax rate for either a yearly or a one-time wealth tax. Our treatment group was provided with easy-to-understand information on the resulting effective lifetime tax burden for the re-spective instrument. We find the preferred effective tax rate to drop by almost 15 percentage points for a yearly wealth tax if our participants are fully informed, whereas we do not find this effect for the one-time wealth tax. In terms of informed preferences our respondents prefer the yearly wealth tax over a one time wealth tax if misperceptions are resolved: the preferred effective tax burden of a yearly wealth tax is about 25 percentage points higher (40.0% vs. 15.2%). While not being able to fully explain the source of this difference, we argue that both the total burden as well as the reasonability of single payments might be factors that form preferences for tax parameters.

Keywords: Wealth taxation, Tax preferences, Misconception, Misperception, Randomized experiment

JEL Classification: C90, D31, D72, H24

Suggested Citation

Chirvi, Malte and Huber, Hans-Peter and Schneider, Cornelius, Biased Preferences for Wealth Taxation: The Case of Misperceived Tax Burden Consequences (June 29, 2021). TRR 266 Accounting for Transparency Working Paper Series No. 54, Available at SSRN: https://ssrn.com/abstract=3876472 or http://dx.doi.org/10.2139/ssrn.3876472

Malte Chirvi (Contact Author)

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

Hans-Peter Huber

Humboldt University of Berlin - School of Business and Economics ( email )

Spandauer Str. 1
Berlin, D-10099
Germany

Cornelius Schneider

University of Mannheim ( email )

D-68131 Mannheim
Germany

HOME PAGE: http://https://www.vwl.uni-mannheim.de/schneider/

Friedrich-Schiller-Universität Jena ( email )

Germany

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