Effects of tax schedules on perceived income distributions

Last registered on March 12, 2019
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Pre-Trial

Trial Information

General Information

Title
Effects of tax schedules on perceived income distributions
RCT ID
AEARCTR-0003978
Initial registration date
March 05, 2019

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
March 12, 2019, 7:09 AM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
United States of America
Region

Primary Investigator

Name
Daniel Diez-Alonso
Affiliation
University of Warwick
Contact Primary Investigator

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2019-03-11
End date
2019-11-01
Keywords
Other, Welfare
Additional Keywords
taxation, inequalities
JEL code(s)
D31, D63, H24
Secondary IDs
Abstract
Citizens do not usually have accurate information on population income distributions and their income rank position, and hence create beliefs of those measures based on partial information. The literature of income comparison has found that reference income of co-workers and personal network have a significant impact on those perceptions, but other influential factors remain unknown. Are tax schedules used by taxpayers as signals on the actual income distribution? Under certain assumptions on how the government designs tax system, changes on the tax burden applied to different levels of income may be used as signals of the actual income densities. Using an online experiment where workers face different tax systems, I aim to identify the potential impact of the structure of tax scales on perceived income distributions and self income rank.
External Link(s)

Registration Citation

Citation
Diez-Alonso, Daniel. 2019. "Effects of tax schedules on perceived income distributions." AEA RCT Registry. March 12. https://doi.org/10.1257/rct.3978-1.0
Former Citation
Diez-Alonso, Daniel. 2019. "Effects of tax schedules on perceived income distributions." AEA RCT Registry. March 12. https://www.socialscienceregistry.org/trials/3978/history/43177
Sponsors & Partners

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Experimental Details

Interventions

Intervention(s)
Workers perform some tasks to earn income, which is then subject to an income tax system. Questions on perceived distributions and self income rank follow.
Intervention Start Date
2019-03-11
Intervention End Date
2019-07-31

Primary Outcomes

Primary Outcomes (end points)
Perceived Income Distribution; Perceived Income Rank
Primary Outcomes (explanation)
Perceived distributions are elicited by incentivised questions on frequency for different ranges of income. Perceived Income Rank is asked directly.

Secondary Outcomes

Secondary Outcomes (end points)
Perceptions on fairness of tax burden.
Secondary Outcomes (explanation)
Usual type of questions as in regular surveys: "Do you think high earners pay too much / about right / too little taxes?"

Experimental Design

Experimental Design
Workers face different tax systems where the tax burden randomly varies across specific ranges of income. The control group faces the same income schedule in both rounds.
Experimental Design Details
Comparison occurs between workers (within round) and within workers (between rounds). Workers face different tax schemes according to (random) treatment at each round, which differ on the structure of the tax brackets (hence resulting on different tax burden on different levels of income). The changes take place in isolated changes, either by changing the level of a given tax band or by adding/subtracting an additional tax band. Two of the treatments increase tax burden at higher incomes (wrt lower incomes) and the other two treatments reduce tax burden at higher incomes (wrt lower incomes).
In addition, those changes on the tax schedule also result on a different marginal tax band assigned to each worker. By randomizing the earned income fraction that forms the taxable income of each round, I can test whether identification with a "tax group" also has an effect on perceived income rank. In this case, individuals with same income level in both rounds act as control for individuals with changing income.
Randomization Method
Random treatment assigned by the program.
Randomization Unit
Individual and round. Randomization affects to both income used in each round (as a random fraction of income earned performing tasks) and to the tax system faced in each round, by each player.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
600 people
Sample size: planned number of observations
1200 perceived distributions and income rank (2 rounds per worker)
Sample size (or number of clusters) by treatment arms
There are 4 treatment groups of 100 workers (facing 4 different treatments) and two control groups of 100 workers.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Humanities & Social Sciences Research Ethics Committee (HSSREC) - University of Warwick
IRB Approval Date
2018-04-23
IRB Approval Number
N/A
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials