Taxpayer Confusion: Evidence from the Child Tax Credit

• 成果类型: Article
• 署名作者: Feldman, Naomi E.; Katuscak, Peter; Kawano, Laura
• 署名单位: Federal Reserve System - USA; Prague University of Economics & Business; Charles University Prague; Czech Academy of Sciences; Economics Institute of the Czech Academy of Sciences; United States Department of the Treasury
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20131189
• 发表日期: 2016
• 页码: 807-835
• 关键词: economic stimulus payments; income-tax; information suppression; shrouded attributes; consumer response; taxable income; SALIENCE; rates; EITC; elasticities

摘要

We develop an empirical test for whether households understand or misperceive their marginal tax rate. Our identifying variation comes from the loss of the Child Tax Credit when a child turns 17. Using this age discontinuity, we find that despite this tax liability increase being lump-sum and predictable, households reduce their reported wage income upon discovering they have lost the credit. This finding suggests that households misinterpret at least part of this tax liability change as an increase in their marginal tax rate. This evidence supports the hypothesis that tax complexity can cause confusion and leads to unintended behavioral responses.