NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Heuristic Perceptions of the Income Tax: Evidence and Implications for Debiasing

Alex Rees-Jones, Dmitry Taubinsky

NBER Working Paper No. 22884
Issued in December 2016, Revised in January 2017
NBER Program(s):AG, LE, LS, PE

Using an incentivized tax forecasting task, we estimate the prevalence of previously discussed heuristics for constructing mental representations of nonlinear incentive schemes. We find strong evidence for “ironing” (linearizing the tax schedule using one’s average tax rate), no evidence for “spotlighting” (linearizing the tax schedule using one’s marginal tax rate), and we identify features of the remaining misperceptions that are not captured by existing models. We then embed these misperceptions in a standard model of income taxation and study their welfare consequences. We find that our estimated misperceptions increase social welfare because they are helpful in achieving redistributive goals.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22884

Users who downloaded this paper also downloaded* these:
Jolls and Sunstein w11738 Debiasing through Law
Fraumeni w14736 The Contribution of Highways to GDP Growth
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us