Are income tax preferences a moral or a selfish choice? : an experimental approach

Abstract

An understanding of personal preferences and attitudes is crucial in order to design an income tax system that people find fair. We have examined, by means of an economic experiment, how selfishness, risk preferences and concerns for the equality/efficiency tradeoff relate to preferences for progressive taxation. Our results indicate that there is no direct link between selfishness and tax preferences. Nevertheless, the degree of selfishness seems to affect the relationship between the other variables. For people who are not very selfish, both risk aversion and a concern for efficiency correspond with a positive attitude towards progressive taxation. As the degree of selfishness increases, risk preferences and concerns for equality and efficiency become less important. At high levels of selfishness, neither selfishness, risk preferences nor concerns for equality and efficiency seem to explain preferences for progressive taxation. In conclusion, income tax preferences are based on both moral and selfish concerns.