Do people really want a simple tax system? Evidence on preferences towards income tax simplification

Blesse, Sebastian ; Buhlmann, Florian ; Doerrenberg, Philipp

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URN: urn:nbn:de:bsz:180-madoc-544831
Document Type: Working paper
Year of publication: 2019
The title of a journal, publication series: ZEW Discussion Papers
Volume: 19-058
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Business School > ABWL u. Betriebswirtschaftliche Steuerlehre (Dörrenberg 2019-)
Business School > ABWL, Taxation and Finance (Voget 2010-)
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H2 , D72 , C9,
Keywords (English): Tax complexity , preferences towards tax simplification , randomized survey experiment
Abstract: Using new survey and experimental data for a representative sample of the German population, we study preferences for tax simplification. The general wisdom seems to suggest that most tax systems are overly complex and that tax simplification is generally desirable. Consistent with this general wisdom, we find that more than 90% of our sample believe that the tax system needs to be simplified. However, there also are efficiency and equity arguments in support of a certain degree of tax complexity and it is puzzling why tax systems remain highly complex despite the conventional view in favor of more simplification. The main purpose of our study then is to investigate if the high support for tax simplification is driven by a lack of awareness about the trade-offs behind simple and complex tax systems. Our data show that the support for simplification decreases as we randomly provide economic arguments against simplification and as we ask respondents if the tax system should account for specific differences in living situations (such as costly care of elderly family members). Overall, our findings suggest that the high support for simpler taxes is to some extent driven by a lack of awareness about the implications of tax simplification.

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