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

Rupert Sausgruber, Jean-Robert Tyran

Publikation: Working/Discussion PaperWU Working Paper

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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. (authors' abstract)
HerausgeberWU Vienna University of Economics and Business
PublikationsstatusVeröffentlicht - 1 Nov. 2013


ReiheWU International Taxation Research Paper Series

WU Working Paper Reihe

  • WU International Taxation Research Paper Series

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