Discriminatory taxes are unpopular—Even when they are efficient and distributionally fair

Rupert Sausgruber; Jean-Robert Karl Tyran

doi:10.1016/j.jebo.2013.12.022

Discriminatory taxes are unpopular—Even when they are efficient and distributionally fair

Rupert Sausgruber, Jean-Robert Karl Tyran

3 Citations (Scopus)

Abstract

We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of the 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 is unpopular, as predicted. Surprisingly, however, DT remains 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.

Original language	English
Journal	Journal of Economic Behavior & Organization
Volume	108
Pages (from-to)	463–476
ISSN	0167-2681
DOIs	https://doi.org/10.1016/j.jebo.2013.12.022
Publication status	Published - 1 Dec 2014

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title = "Discriminatory taxes are unpopular—Even when they are efficient and distributionally fair",

abstract = "We explore the political acceptance of taxation in commodity markets. Participants in our experiment earn incomes by trading and must collectively choose one of the 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 is unpopular, as predicted. Surprisingly, however, DT remains 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.",

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AU - Sausgruber, Rupert

AU - Tyran, Jean-Robert Karl

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PY - 2014/12/1

Y1 - 2014/12/1

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 the 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 is unpopular, as predicted. Surprisingly, however, DT remains 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 the 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 is unpopular, as predicted. Surprisingly, however, DT remains 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.

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DO - 10.1016/j.jebo.2013.12.022

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VL - 108

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EP - 476

JO - Journal of Economic Behavior & Organization

JF - Journal of Economic Behavior & Organization

ER -

Discriminatory taxes are unpopular—Even when they are efficient and distributionally fair

Abstract

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