Inattention and the Taxation Bias

Boccanfuso, Jeremy und Ferey, Antoine (13. April 2022): Inattention and the Taxation Bias. Collaborative Research Center Transregio 190, Discussion Paper No. 323

Abstract

This paper shows that agent inattention to taxes generates a time-inconsistency problem in the choice of tax policy. In equilibrium, inattention leads to inefficiently high tax rates and a taxation bias emerges. Combining structural and sufficient statistics approaches, we quantify the magnitude and the welfare effects of this policy distortion for US income tax rates, and find that the taxation bias is large, alters the progressivity of income taxes, and significantly reduces social welfare. Overall, our findings shed new light on the policy and welfare implications of inattention and misperceptions.

• Dokumententyp: Paper
• Keywords: inattention, misperceptions, optimal taxation, policy distortions
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition"
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D03, H21
• Sprache: Englisch