Tax-Rate Biases in Tax Decisions: Experimental Evidence

ABSTRACT This study investigates biases in tax decisions. In a series of four laboratory experiments with 303 students and 62 professionals, we document systematic tax-rate bias decisions under time constraints. Specifically, decision makers overestimate the relevance less complex information compared to more tax-base information. behavior leads suboptimal We also find that making, on average, is unaffected by professional experience: Students professionals are similarly prone bias. However, senior rationally inattentive. These likely exhibit when exhibiting such relatively costly. Overall, our findings suggest resource constraints impede use information, which results Interviews indicate potential for real-world thereby provide directions future research. JEL Classifications: C91; D03; H32; K34; M21; M41.