The perception of the income tax: Evidence from Germany

Denis Beninger
Centre for European Economic Research (ZEW), Germany

The paper explores whether the tax rule defined by the tax law or the perception of the tax system by the single household matters in explaining the household behaviour. In particular, in Germany, married couples have the choice between two systems of income tax collection. In both cases, the perceived marginal tax rate, i.e. the rate which formally applies when the person pays the tax, and the real one, i.e. the one calculated from the tax function, differs systematically. Using the 2004 wave of the German Socio-Economic Panel, we find that (i) the perceived marginal tax rate is a better indicator than the real one when explaining the couples' behaviour, and (ii) there is a high correlation between income pooling and the system of tax collection chosen by the couple.

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