Are More Choices Better? An Experimental Investigation Of The Effects Of Multiple Tax Incentives

Keywords

Choice complexity; Tax incentives; Tax policy

Abstract

The U.S. federal income tax system includes numerous incentives intended to encourage many behaviors. However, these incentives add complexity. This study investigates how one source of complexity, the number of different incentives, affects individuals’ use of tax incentives. The results from two experiments detect no evidence that having more (versus fewer) incentive choices (i.e., high choice complexity) affects individuals’ decisions to engage in the targeted behavior or select an incentive. However, the results do show that individuals faced with high choice complexity are more likely to make errors and less likely to choose the optimal incentive. Further, high choice complexity leads to greater perceived complexity and difficulty, which, in turn, is related to less positive emotions and more anxiety. Thus, high choice complexity has negative consequences on individuals. This study also contributes to the choice complexity literature by examining its effect on making an optimal choice.

Publication Date

9-1-2016

Publication Title

Journal of the American Taxation Association

Volume

38

Issue

2

Number of Pages

111-128

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.2308/atax-51478

Socpus ID

84994222996 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84994222996

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