Are consumption taxes really disliked more than equivalent costs? Inconclusive results in the USA and no effect in the UK

Author(s)

Jerome Olsen, Christoph Kogler, Mark J Brandt, Linda Dezsö, Erico Kirchler

Abstract

In two experiments on hypothetical purchase decisions, Sussman and Olivola (2011) found that US citizens prefer avoiding tax-related costs over avoiding tax-unrelated monetary costs of the same size. The original Experiment 1 and 2 tests of this Tax Aversion indicated that people are willing to wait longer to receive a discount when it refers to taxes (e.g., “axe-the-tax discount”) than when it is just a regular discount (e.g., “customer rewards”). We conducted high-powered close replications of both original studies, Experiment 1 (N = 590) and Experiment 2 (N = 650), which reveal either no effect (Experiment 1: r = 0.02, 95% CI [−0.06, 0.10]) or a small effect (Experimental 2: r = 0.09, 95% CI [0.01, 0.16]) in the USA. We also replicated both experimental procedures in the UK to test whether the effect generalized to a value added tax system. Neither Experiment 1 (N = 595; r = 0.01, 95% CI [−0.07, 0.09]) nor Experiment 2 (N = 673; r = 0.03, 95% CI [−0.04, 0.11]) revealed an effect in the UK. Tax Aversion in hypothetical consumption decisions seems to be a smaller phenomenon than originally proposed and does not generalize to a value added tax system.

Organisation(s)

Department of Occupational, Economic and Social Psychology, Vienna Center for Experimental Economics

External organisation(s)

Tilburg University

Journal

Journal of Economic Psychology

Volume

75

No. of pages

10

ISSN

0167-4870

DOI

https://doi.org/10.1016/j.joep.2019.02.001

Publication date

02-2019

Peer reviewed

Yes

Austrian Fields of Science 2012

501021 Social psychology, 501001 General psychology

Keywords

ASJC Scopus subject areas

Economics and Econometrics, Applied Psychology, Sociology and Political Science

Portal url

https://ucrisportal.univie.ac.at/en/publications/c4e0d96d-bb1b-4e6e-b4a5-ddb1560b1282