The Effects of Tax Salience and Tax Experience onIndividual Work Efforts in a Framed Field Experiment

We conduct a framed field experiment with 245 employed persons (no students) as subjectsand a real tax, which is levied on the subjects’ income from working in our real effort task. Inour first three treatments, the net wage is constant but gross wages are subject to differentconstant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higherunder the tax than in the no tax treatment. Subjects perceive a too high net wage becausethey underestimate the tax. We conjecture that tax perception depends on the tax rate, thepresentation of the tax and the experience subjects have with taxation. These conjecturesare confirmed in four further treatments employing a direct and an indirect progressive taxscale. It turns out that simple at taxes are particularly prone to being misperceived becausetheir simplicity reduces the tax salience....