Perception of income tax rates: evidence from Germany

Blaufus, Kay; Bob, Jonathan; Hundsdoerfer, Jochen; Sielaff, Christian; Kiesewetter, Dirk; Weimann, Joachim

doi:10.1007/s10657-013-9389-9

Cited by 28 publications

(23 citation statements)

References 32 publications

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“…Previous studies inform a significant relationship between perceived fairness of tax burden and tax compliance (Gberegbe et al, 2015). More specifically, taxpayers prefer progressive tax rates due to fairness reason (Blaufus et al, 2015). Further, we measure firm age by subtracting the year 2018 with the firm's foundation year.…”

Section: Methodsmentioning

confidence: 99%

Market competition, fairness and tax compliance: The formal sector perspective

Damayanti¹,

Matasik²,

Supramono³

2021

Journal of International Studies

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Section: Methodsmentioning

confidence: 99%

Market competition, fairness and tax compliance: The formal sector perspective

Damayanti¹,

Matasik²,

Supramono³

2021

Journal of International Studies

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“…Tests of tax understanding at different regions of the tax schedule, as in Blaufus et al (2015) and Gideon (2017), move in the direction of our empirical design, and suggest misperceptions of taxes on the comparatively rich and poor that could arise from ironing. Yet as we show in Section 2, none of the existing survey evidence is able to firmly distinguish ironing from other candidate models (and indeed, this was not the goal of this previous work).…”

Section: Introductionmentioning

confidence: 94%

“…Fewer results are available to assist in assessing Predictions 1, 2, 4, or 5. Blaufus et al (2015) ask a panel of German respondents about their perceptions of the taxes paid by those earning 10,000, 40,000, 300,000, or 2 million euros a year. They find evidence that the tax burden is overestimated at the bottom of the scale and underestimated at the top of the scale, consistent with Prediction I-1.…”

Section: Summary Of Existing Survey Evidencementioning

confidence: 99%

Measuring “Schmeduling”

Taubinsky¹

2016

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What mental models do individuals use to approximate their tax schedule? Using incentivized forecasts of the U.S. Federal income tax schedule, we estimate the prevalence of the "schmeduling" heuristics for constructing mental representations of nonlinear incentive schemes. We find evidence of widespread reliance on the "ironing" heuristic, which linearizes the tax schedule using one's average tax rate. In our preferred specification, 43% of the population irons. We find no evidence of reliance on the "spotlighting" heuristic, which linearizes the tax schedule using one's marginal tax rate. We show that the presence of ironing rationalizes a number of empirical patterns in individuals' perceptions of tax liability across the income distribution. Furthermore, while our empirical framework accommodates a rich class of other misperceptions, we find that a simple model including only ironers and correct forecasters accurately predicts average underestimation of marginal tax rates. We replicate our finding of prevalent ironing, and a lack of other systematic misperceptions, in a controlled experiment that studies real-stakes decisions across exogenously varied tax schedules. To illustrate the policy relevance of the ironing heuristic, we show that it augments the benefits of progressive taxation in a standard model of earnings choice. We quantify these benefits in a calibrated model of the U.S. tax system.

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“…Tax researchers discuss two distinct groups of tax features: actual ("objective") and perceived ("subjective") [28][29][30]. The idea stems from the tax perception literature, which claims that for measuring, analyzing, and explaining the reaction of individuals to taxation, perceived, or subjective, tax features are more essential [28]. These studies stress the importance of taxes on individual decision-making, but they do not mention which tax rates (average or marginal) are relevant.…”

Section: Tax Ratesmentioning

confidence: 99%

Tax Progressivity and Entrepreneurial Dynamics

Nadirov

Dehning

2020

Sustainability

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This study examines how tax progressivity affects entrepreneurial dynamics in 18 countries. The results show that increased downside progressivity has a positive influence on the transition rate from nascent entrepreneurship to established business ownership. In addition, only downside progressivity calculated using marginal tax rates is related to the transition ratio, implying that it is marginal tax rates, and not average tax rates, that are used in the entrepreneurial decision-making process. This paper contributes to our understanding of entrepreneurial dynamics and the effect of tax progressivity on the transition from nascent entrepreneurship to established business ownership.

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Perception of income tax rates: evidence from Germany

Cited by 28 publications

References 32 publications

Market competition, fairness and tax compliance: The formal sector perspective

Market competition, fairness and tax compliance: The formal sector perspective

Measuring “Schmeduling”

Tax Progressivity and Entrepreneurial Dynamics

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