Discriminatory Taxes are Unpopular Even when they are Efficient and Distributionally Fair

TY - UNPB

T1 - Discriminatory Taxes are Unpopular Even when they are Efficient and Distributionally Fair

AU - Sausgruber, Rupert

AU - Tyran, Jean-Robert Karl

N1 - JEL-Codes: C92, H21, D72

PY - 2013

Y1 - 2013

N2 - We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of two tax regimes to raise a given tax revenue. A “uniform tax” (UT) imposes the same tax rate on all markets and is fair in that it yields the same – but low – income to participants in all markets. The “discriminatory tax” (DT) imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets. We find that DT are unpopular, as predicted. Surprisingly, however, DT remain unpopular when they are both efficient and produce a fair (equal) distribution. We conclude that non-discrimination (equal treatment) is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution

AB - We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of two tax regimes to raise a given tax revenue. A “uniform tax” (UT) imposes the same tax rate on all markets and is fair in that it yields the same – but low – income to participants in all markets. The “discriminatory tax” (DT) imposes a higher burden on markets with inelastic demand and is therefore efficient but it is also unfair in that incomes are unequal across markets. We find that DT are unpopular, as predicted. Surprisingly, however, DT remain unpopular when they are both efficient and produce a fair (equal) distribution. We conclude that non-discrimination (equal treatment) is a salient fairness principle in taxation that shapes voting on commodity taxes above and beyond concerns for efficiency and equal distribution

KW - Faculty of Social Sciences

KW - taxation

KW - behavioral public economics,

KW - voting

KW - efficiency

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - Discriminatory Taxes are Unpopular Even when they are Efficient and Distributionally Fair

PB - Økonomisk institut, Københavns Universitet

CY - Kbh

ER -