سهم اقتصاد رفتاری برای اصلاحات مالیاتی در انگلستان
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|6788||2012||8 صفحه PDF||سفارش دهید||7510 کلمه|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : The Journal of Socio-Economics, Volume 41, Issue 4, August 2012, Pages 468–475
This paper examines the contribution of behavioral economics to tax reform by examining two major reforms in the United Kingdom which may be seen as natural experiments – the reform of local taxation and the introduction of value added tax. The case for both was based strongly on mainstream economic analysis but one was a failure and the other a success. The introduction of the local community charge, or ‘poll tax’ as it became known, was such a failure that not only did it have to be repealed but it was also a factor in the downfall of Mrs. Margaret Thatcher as Prime Minister. The introduction of value added tax took more account of behavioral factors and was successful. The paper concludes that a wider approach based on behavioral as well as mainstream economics may have considerable advantages in developing tax policy.
As the contribution of behavioral economics becomes more widely recognized, one area that could usefully be further explored is its contribution to the development of successful tax reform. To this end, it is helpful to be clear about how behavioral economics differs from more traditional contributions. In his paper ‘What is Behavioral Economics?’ in this journal Tomer (2007) identified six key dimensions along which behavioral economics differed from mainstream economics in relation to science. Although these dimensions were concerned with characterizing behavioral economics and its different strands, they also shed light on the relative merits of behavioral and mainstream approaches to applied matters such as tax reform. This is particularly interesting because there is a paradox in the conduct of much tax reform. The tax system is used to influence behavior – for example encouraging certain activities such as saving. Nevertheless, insufficient account is sometimes taken of behavioral factors in the development and implementation of tax reforms themselves. In his Presidential Address to the British Association for the Advancement of Science, Huxley (1870) said that the great tragedy of science was ‘the slaying of a beautiful hypothesis by an ugly fact’. In economics the fact may be behavioral. Conventional economic analysis provides many important insights into designing relevant policy measures and can generate elegant possible solutions. However, a tax policy developed on the basis of mainstream economics alone may not take appropriate account of all the important factors – ugly or not – of the complex and changing requirements of successful tax reform (James and Edwards, 2008). Behavioral economics questions mainstream assumptions such as individuals are always perfectly rational and operate only in their own self-interest. In his classic paper on the methodology of positive economics, Friedman (1953) argued that the ‘assumptions’ on which a theory is based should not be judged on their ‘realism’ – they must necessarily abstract from the complexities of everyday life – but how well the resulting economic hypothesis works. This approach has been subject to important discussion – see for example Altman (2004) – and it has been frequently argued that basic assumptions of mainstream economics deviate consistently from reality in significant ways. DellaVigna (2009) summarized deviations from the standard model as non-standard preferences, non-standard beliefs and non-standard decision-making. Furthermore, there is considerable evidence regarding specific areas such as the importance individuals place on fairness in taxation, the endowment effect, framing of decisions, limited attention, loss aversion and mental accounting. As Congdon et al. (2009: 375) put it ‘the implications of behavioral economics … for public policy, including tax policy, have yet to be systematically explored, and … this oversight leads to both mistaken policy and missed opportunity’. Behavioral economics has a particular role to play in policy areas such as developing tax reform. Meade (1979: 9) once wrote ‘I am an economist and have tried to give you an economic solution for an economic problem. Please do not argue that I am a rotten economist on the grounds that the economic solution is politically unacceptable. The really difficult part of our present problem is political’. Such is the case with tax reform. Mainstream economics provides an essential contribution to the analysis of economic issues and in some areas it may be sufficient to generate unambiguous improvements to the tax system, for example in some technical tax matters relating to corporate taxation. However, behavioral economics improves the realism of the psychological assumptions on which economic theory is based and therefore may be particularly important where changes potentially affect large numbers of individual taxpayers. It may therefore be advantageous in anticipating taxpayers’ responses and in designing a reform that is sufficiently politically acceptable in order to succeed. This paper compares two substantial tax reforms in the UK – natural experiments in many ways – to explore these issues. In terms of tax reform, the definition of success used here is that the reform largely achieved its objectives and the definition of failure is that it did not. The cases for both reforms were based on strong theoretical arguments along the lines of mainstream economics. However such a basis for change was insufficient to achieve success. One of these reforms offered an elegant theoretical solution to a perceived problem but did not take sufficient account of behavioral factors and failed. The other reform did take account of behavioral factors and succeeded. The former of these changes concerned local taxation and the intention was to influence voter behavior by linking local public expenditure to local tax levels. This was done by replacing the local property tax which was levied directly only on one householder in each home with a tax whereby all voters paid towards local public expenditure. This was officially named the community charge but was quickly dubbed the poll tax. The other reform was the replacement of two existing taxes with value added tax on the basis that a broadly based tax would have limited distortionary effects on consumer expenditure and would be an important step towards European tax harmonization. The economic arguments for introducing a value added tax are strong enough for it also to be seriously considered, for example by Graetz (2007), as a beneficial tax reform for the United States. In many ways chance was a major factor in both outcomes. A more systematic approach to tax reform would take account both of conventional economic analysis and behavioral factors as well as the complex process of developing successful tax policy. Section 2 raises fundamental difficulties involved in producing unambiguous proposals for improvement based on mainstream economic analysis alone. The theory of the second best, optimal tax literature and public choice analysis indicate limitations of such an approach. Section 3 examines the complex process of tax reform and that it is a dynamic process, not just an exercise in comparative statics. Successful tax reform must therefore take account not only of behavioral factors but also how they are likely to change over time and how they will be affected by the reform itself. Section 4 describes the unsuccessful change to local government taxation and Section 5 the introduction and successful establishment of value added tax. Finally Section 6 draws some conclusions.
نتیجه گیری انگلیسی
It might be reassuring to be able to report that the spectacular failure of the poll tax and the success of the value added tax led to more account being taken of behavioral matters in developing tax reform but this has not always been true. As Hegel (1837) suggested in the introduction to his Philosophy of History, perhaps the only thing we learn from history is that we never learn from history. For example, in 2007 the UK government proposed a considerable simplification to the income tax by increasing the lowest tax band of 10% to bring it in line with the main 20% rate, which is that paid the majority of UK taxpayers. The government did not take full account of the equity implications of this change. The result was that following its introduction in 2008 there was a considerable public outcry and Members of Parliament campaigned successfully for a change which finally took the form of an increased personal tax free allowance to compensate those adversely affected by the reform. As a higher personal allowance is more effective than the 10% lower rate of personal income tax in helping those on low incomes, the eventual result was an improvement (Johnson, 2008). However, it would have been far better for tax morale, and the government itself, if important behavioral factors had been accommodated in the original reform. Instead the behavioral issues were left to emerge in a chaotic political process until public opinion finally prevailed, though with unintended side-effects (Adam et al., 2008). It thus provides another example of the dynamic nature of tax reform described in Section 3 above whereby inadequate reforms may allow unnecessary scope for the pressures for and against change to lead to imperfect outcomes. The 10% tax rate reform reinforces the evidence from the two main cases examined in this paper. All three were developed on the basis of sound economic arguments but only the introduction of value added tax had an appropriate behavioral input. As already stated, mainstream economics offers a great deal of insight into practical issues but behavioral economics may offer an important additional contribution to the process of developing tax reform and therefore a greater chance of successful change. It is clear from the theory of the second best, the optimal taxation literature and the public choice approach that mainstream economics has limitations when it comes to dealing with complex policy issues such as tax reform. Behavioral economics may bridge at least some of the gap that might exist between conventional economic theory and the requirements involved in developing successful tax policy. This is particularly true where reforms affect large numbers of individual taxpayers. Tax changes can affect, and be affected by, a wide range of factors. These begin with a range of different objectives in government economic and social policies and these objectives are subject to changes in emphasis, if not direction. In addition, the economic, social, political and technical environment in which taxes have to operate is also changing constantly so reforms should be sufficiently robust to withstand being distorted by competing pressures from sectional interests. The conclusion is that the flexibility and wider scope of an approach based on both mainstream and behavioral economics may have considerable advantages in developing tax policy and specific reforms. Failure to take appropriate account of behavioral issues in the development and implementation of change can mean the policy objectives are not achieved, as in the case of the poll tax. Alternatively the objectives may be partially achieved but the outcome may fall short of what could have been possible. The contribution of behavioral economics should therefore always be included in the process of developing tax reforms.