An Experimental Investigation of Taxpayer Judgments on Rate Structure in the Individual Income Tax System.

Abstract The purpose of this research is to examine taxpayers' perceptions of vertical equity for the Individual Income tax. Approximately six hundred randomly selected heads of households from across the United States responded by mail to an eight-page booklet containing open-ended, scaled-response, and experimental questions about fair tax rates for persons at different income levels. A between-subjects design tested whether tax assessments varied when expressed in rates or dollars and whether differences in federal budget requirements Influenced tax burden allocations. A within-subject analysis tested the association between self-interest and tax rate preferences. In general, respondents preferred a mildly progressive income tax rate structure. Tax burdens assessed in dollars rather than rates were significantly less progressive. Normative vertical equity choices remained constant even when government revenue needs changed sharply. Self-interest was evident in respondents' vertical equity choices, as indicated by significant correlations between respondents' income and assigned tax burdens for six of nine hypothetical taxpayers whose incomes ranged from 5, 000 to 100, 000.