%0 Report
        %A Blumkin, Tomer
%A Ruffle, Bradley
%A Ganun, Yosef
        %T Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods
        %D 2010
        %8 2010 Aug
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 5145
        %U https://www.iza.org/publications/dp5145
        %X The public finance literature demonstrates the equivalence between consumption and labor-income (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income tax and an equivalent consumption tax lead to identical labor-leisure allocations. Despite controlling for subjects’ work ability and inherent labor-leisure preferences and disallowing saving, subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax. We discuss the economic implications of a policy shift to a consumption tax.
        %K experimental economics
%K tax equivalence
%K income tax
%K consumption tax
%K behavioral economics