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

Publication date: Available online 6 February 2019Source: Journal of Economic PsychologyAuthor(s): Jerome Olsen, Christoph Kogler, Mark J. Brandt, Linda Dezső, Erich KirchlerAbstractIn 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 = .02, 95% CI [-.06, .10]) or a small effect (Experimental 2: r = .09, 95% CI [.01, .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 = .01, 95% CI [-.07, .09]) nor Experiment 2 (N = 673; r = .03, 95% CI [-.04, .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.

Source: Journal of Economic Psychology - February 7, 2019 Category: Psychiatry & Psychology Source Type: research