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Saturday, April 9, 2016

J.Baron & E.McCaffery :Thinking About Tax (pdf)

via Stian Reimers in Commentary : "When it comes to tax, how do we decide what’s fair?" 


"This article reports the findings of several experiments about perceptions of various
aspects of tax-law design. The authors find that people are vulnerable to a wide
range of heuristics and biases in evaluating public finance systems, leading to
inconsistent judgments and evaluations. These errors in judgment are specific
instances of a more general isolation effect, whereby people respond quickly to a
decision or choice set, focusing on salient aspects while ignoring or underusing
logically relevant information that is not immediately before them. In tax and public
finance, this tendency to make decisions as if with blinders on is problematic. As a
result of it, skillful politicians can manipulate public opinion, and tax system design
can be volatile on account of the possibility of eliciting preference reversals through
purely formal rhetorical means. More troubling, the findings suggest a likely and
persistent wedge between observed and optimal public finance."

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