DISCUSSION OF An Empirical Investigation of Taxpayer Awareness of Marginal Tax Rates.

Abstract The article presents a discussion of an empirical investigation of taxpayer awareness of marginal tax rates. One of the biggest hurdles of tax research is the ability to secure data and appropriately measure the primary explanatory variable, marginal tax rate (MTR). A thorough understanding of how taxes affect individual and corporate strategies is critically dependent on accurately measuring the tax incentive. In this vein, researchers Timothy J. Rupert and Carol M. Fischer make an interesting contribution to a burgeoning stream of tax literature investigating alternative tax-rate measures. Documentation of differences in perceived and actual MTR is long overdue. As Rupert and Fischer point out, most available data sources provide actual MTR or information used to estimate actual MTR. Researchers can only feel comfortable using estimated or actual MTR to understand and predict taxpayer behavior if actual and perceived MTR coincide. There is a dearth of available data on perceived MTR. The only widely available information the author is aware of on MTR perceptions is now over ten years old. The 1983 survey of Consumer Finances included a question analogous to Rupert and Fischer's question, "If you were to earn an extra dollar of income, about what percentage of that would have to be paid in federal income taxes?"