Do voters know their tax liabilities accurately or do they systematically misperceive them? Could such misperceptions influence voters' choices over alternative tax structures proposed by politicians? This paper assesses the accuracy of individuals' tax perceptions in the UK using micro-data from the British Social Attitudes Survey (1995) and tests an empirical model of the determinants of tax structure preferences, including tax misperceptions. A systematic bias towards over-estimation of income and expenditure tax (VAT) liabilities is found and individ uals' tax preferences appear to be both dominated by self-interest and distorted by tax misperceptions.Whether using a traditional utility maximisation framework or a variety of public choice frameworks, economists agree that consumer-voters, or taxpayer-voters, dislike taxes. Taxes lower the consumption possibility set and thereby utility. Politicians proposing higher taxes expect to lose votes unless they can persuade voters that the utility gain from the use of those taxes will exceed the tax-induced utility loss. Of course, the extent of individuals' losses will depend on their circumstances and how revenues are raised -the tax structure. Traditional tax incidence and excess burden analyses, and models of political costs associated with the tax structure Winer, 1984, 1988), each provide guidance on the extent to which different individuals may be expected to suffer (and vote) differently under alternative tax structures. Much will depend on attitudes towards, and perceptions of, specific taxes, especially personal income taxes and consumption taxes.Underlying most such analyses are two common presumptions: (i) tax preferences are dictated by self-interest; and (ii) individuals accurately assess their tax liabilities and so make informed choices. Two largely independent areas of literature have challenged these assumptions. First, models incorporating altruism into individuals' utility functions -such as in the form of bequest motives -suggest rather different responses to particular tax regimes compared to models based purely on self-interest. Lambert (1993) for example, considers social evaluation functions in which individuals, conditional on their own income levels, may express a preference for an income distribution in which there are fewer individuals less well off than themselves. Such altruism would imply, ceteris paribus, a preference for a tax that redistributes income from those with incomes above, to those with incomes below, oneself. Similarly, models incorporating altruistic intergenerational transfers (e.g. Altig and Davis, 1992) demonstrate quite different * We are grateful to Lindsay Brook, for providing the BSAS (1995) data, and to three anonymous referees who provided many insightful comments and suggestions for improvement. The usual disclaimer applies.
The capitalization rate is important in demand for houses either for dwelling or for an alternative financial investment. A portfolio holder may buy a house to live in or to maintain the value of his/her financial saving. On the other hand, one may prefer a mortgage loan to buy a house to live in, instead of paying rent. A rationale for such behaviors is the capitalization rate. In this study, we utilize a set of micro-data collected from the various advertising sources open to public, and compute capitalization rates, and then estimate those rates on a set of variables related to house characteristics. Our findings show that the capitalization rates are higher for second hand houses, probably because of higher maintenance expenses. Also the size, the distance to city center, and some other factors seem to significantly affect the capitalization rates.
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