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

Jerome Olsen, Christoph Kogler, Mark Brandt, Linda Deszö, Erich Kirchler

Research output: Contribution to journalArticleScientificpeer-review

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.
LanguageEnglish
JournalJournal of Economic Psychology
DOIs
Publication statusAccepted/In press - 6 Feb 2019

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taxes
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Consumption tax
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Costs
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customer
Discount

Cite this

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title = "Are consumption taxes really disliked more than equivalent costs?: Inconclusive results in the USA and no effect in the UK",
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.",
author = "Jerome Olsen and Christoph Kogler and Mark Brandt and Linda Desz{\"o} and Erich Kirchler",
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Are consumption taxes really disliked more than equivalent costs? Inconclusive results in the USA and no effect in the UK. / Olsen, Jerome; Kogler, Christoph; Brandt, Mark; Deszö, Linda; Kirchler, Erich.

In: Journal of Economic Psychology, 06.02.2019.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Brandt, Mark

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AU - Kirchler, Erich

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