Framing Effects In Taxation

On October 24th, 1994, the pro-government German newspaper 'Die Welt' reported that the Minister of Family Affairs, Mrs. Hannelore Ransch, member of the ruling Christian Democratic Union (CD U), withdrew her candidacy for a second term after serving a four year term. While Chancellor Helmut Kohl and other party colleagues officially expressed their regret for this move, the conservative press openly announced their relief. A symbolic photo of Ransch was published together with the article: In the background, two direction indicators are discernable, one pointing to the 'emergency exit' and the other to the 'escape route'. What led up to this state of affairs? Some months before, Ransch had triggered off a storm of public indignation due to her proposal to partly re place the present German child-benefit system by 'tax fines for the childless'. To be exact, the minister's idea was to distinctly increase child allowance and child benefit, and to bill childless families for this measure, that is, childless couples and singles should have to payoff a tax surcharge christened 'Zu kunftsbeitrag' (,contribution to the future'). However, only the second part of her proposal, the tax fine, made it to the headlines (compare, for exam ple, 'Frankfurter Allgemeine Zeitung', February 19th, 1994, and 'Die Welt', March 28th, 1994).

The subject of this work is framing effects in the perception of taxation. Its purpose is to demonstrate that the framing of the tax system, i.e. describing the tax system either in terms of gains or losses, can significantly alter peoples preferences for taxation. In order to investigate such framing effects empirically, a large survey among the personnel of several North-German firms was conducted. The first part of the book gives a comprehensive survey of the literature concerned with framing effects a task that has not yet been done - and also provides new insights into the theory of framing. The second part reports on the results gained from our empirical investigation. It is shown that people indeed are susceptible to framing effects in the way hypothesized. The results strongly support Richard Thaler's endowment-effect hypothesis.

Today's politicians and political groups devote great attention and care to how their messages are conveyed. From policy debates in Congress to advertising on the campaign trail, they carefully choose which issues to emphasize and how to discuss them in the hope of affecting the opinions and evaluations of their target audience. This groundbreaking text brings together prominent scholars from political science, communication, and psychology in a tightly focused analysis of both the origins and the real-world impact of framing. Across the chapters, the authors discuss a broad range of contemporary issues, from taxes and health care to abortion, the death penalty, and the teaching of evolution. The chapters also illustrate the wide-ranging relevance of framing for many different contexts in American politics, including public opinion, the news media, election campaigns, parties, interest groups, Congress, the presidency, and the judiciary.

We report results from an experiment designed to evaluate the impact of different descriptions of the after-tax wage on both (1) subjects' willingness to perform a work task rather than an alternative leisure option, and (2) the amount of work performed by those subjects selecting the work task. Utilizing an experimental design that facilitates both within and between-subject comparisons, we find that subjects' willingness to work varies with the framing of the after-tax wage and that, in particular, subjects are much less willing to work when the returns to work are framed as a low wage plus a bonus than when the returns are described as a high wage minus a tax. Along the intensive margin we find suggestive evidence that subjects stop working just before their wage becomes subject to a significantly higher marginal tax rate, but we do not observe similar clustering when gross wages become subject to an equivalent wage decrease that is not described as a tax increase.

This book explores tax evasion through an extensive psychological approach, surveys and official records to simulate real-world cases.

This paper investigates the presence of framing effects and loss aversion in tax reporting behavior of wage earners using a balanced panel of German income tax return data. Reference dependence and loss aversion suggest that individuals in a perceived loss situation attribute higher value to a given amount of positive change in outcome than individuals in a perceived gain situation do. Applied to tax reporting behavior, taxpayers who perceive their tax situation as unfavorable compared to a given reference point are expected to make greater effort or accept higher costs to prevent or reduce that perceived loss than taxpayers perceiving themselves to be in a favorable situation. Greater effort can in turn be associated with higher reporting aggressiveness. We identify a potential reference point in taxpayers' previous year's outcome and examine whether taxpayers claim higher additional tax deductions in a loss situation than in a gain situation. We use a difference-in-difference approach with a one-on-one matching strategy to analyze reporting behavior. We find that taxpayers in a loss situation claim higher income-related deductions than taxpayers in a gain situation.

Learn how to tackle personal dilemmas and the deadlock of political discourse by using this book's rational framing techniques.

Tax evasion is a complex phenomenon which is influenced not just by economic motives but by psychological factors as well. Economic-psychological research focuses on individual and social representations of taxation as well as decision-making. In this 2007 book, Erich Kirchler assembles research on tax compliance, with a focus on tax evasion, and integrates the findings into a model based on the interaction climate between tax authorities and taxpayers. The interaction climate is defined by citizens' trust in authorities and the power of authorities to control taxpayers effectively; depending on trust and power, either voluntary compliance, enforced compliance or no compliance are likely outcomes. Featuring chapters on the social representations of taxation, decision-making and self-employed income tax behaviour, this book will appeal to researchers in economic psychology, behavioural economics and public administration.