Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81352
Authors: 
Sanandaji, Tino
Wallace, Björn
Year of Publication: 
2010
Series/Report no.: 
IFN Working Paper 837
Abstract: 
In this paper we present survey evidence suggesting that there exists a sizeable fiscal illusion amongst the general public in Sweden. Respondents in a nation-wide and representative survey systematically underestimate the share of an ordinary worker’s income that is transferred to the public sector. Furthermore, we make a theoretical distinction between tax illusion and fiscal obfuscation, a proposed novel type of fiscal illusion. It has previously been assumed that fiscal illusion derives from a fragmentized tax system with many small, and largely invisible, taxes which tend to be ignored or underestimated by the tax payers. We hypothesize that this systematic bias could in addition emanate from misapprehensions of the real incidence of a tax. Evidence is presented that this could apply even when taxes are few and large, contrary to the tax complexity hypothesis. When this misperception derives from seemingly deliberate tax design and tax labeling, as appears to be the case with the payroll taxes in Sweden, we call it fiscal obfuscation.
Subjects: 
Fiscal Illusion
Fiscal Obfuscation
Tax Illusion
Tax Labeling
Tax Structure
Personal Income Taxation
JEL: 
H11
H22
H24
H30
Document Type: 
Working Paper

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