The Biased Effect of Aggregated and Disaggregated Income Taxation on Investment Decisions

  • Martin Fochmann
  • Dirk Kiesewetter
  • Abdolkarim Sadrieh
Schlagworte: tax perception, risk-taking behavior, distorting taxation, JEL: C91, D14, H24

Abstract

Income taxation may not only affect investment behavior by distorting payoffs, it may also have a more subtle, psychological effect, by biasing investors' perceptions of the financial consequences. In a laboratory experiment that allows us to vary the taxation method, while keeping the financial outcomes constant, we find clear evidence that aggregated income taxation (comparable to profit taxation) with complete loss deduction induces a sustained bias towards more risk-taking, while disaggregated income taxation (comparable to a transaction taxation with loss offset) does not. We suggest that this bias may be exploited to increase the volume of private investments by choosing aggregated income taxation, if investors are (too) risk-averse, and to decrease the volume and the risk by choosing disaggregated income taxation, if investors are (too) risk-seeking

Veröffentlicht
2018-09-05
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