Discontent with Taxes and the Timing of Taxation: Experimental Evidence

This paper reports experimental results from a linear sanction cost variant of the power-to-take game, with implications for tax collection policies. This framework allows to compare a pay-as-you-earn (PAYE) tax collection system with an ex post tax collection system in which payroll taxes are levied at the end of the fiscal year. In the second system, taxpayers might develop a feeling of income ownership, and express higher dissatisfaction if the government appropriates a part of it. In our data, dissatisfaction with taxation, as proxied by the sanction in the power-to-take game, is significantly higher in the ex post tax collection system compared with the PAYE system. Communication opportunities are associated with lower sanction rates, yet the communication channel is not used extensively by participants.