(Mathematical) Complexity and Preferences for Taxation: The Case of Wealth Taxation

54 Pages Posted: 1 Jul 2021 Last revised: 25 Sep 2022

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-Universit├Ąt Jena

Date Written: September 22, 2022

Abstract

It is well documented that humans have difficulties in understanding nonlinear growth. This paper explores to what extent this type of bounded rationality translates into preferences for specific wealth-tax designs. In particular, we quantify 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 2x2 design, our respondents were randomly selected to indicate both their preferred tax allowance and tax rate for either a yearly or a onetime wealth tax. Our treatment group was provided with easy-to-understand information on the resulting total tax burden for the respective wealth tax instrument. We find the preferred effective tax rate drops 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. We argue that both the total tax burden and the perceived feasibility of single payments are 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, (Mathematical) Complexity and Preferences for Taxation: The Case of Wealth Taxation (September 22, 2022). 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-Universit├Ąt Jena ( email )

Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
80
Abstract Views
447
rank
422,817
PlumX Metrics