TY  - RPRT
        AU  - Blumkin, Tomer
AU  - Ruffle, Bradley
AU  - Ganun, Yosef
        TI  - Are Income and Consumption Taxes Ever Really Equivalent? Evidence from a Real-Effort Experiment with Real Goods
        PY  - 2010/Aug/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 5145
        UR  - https://www.iza.org/publications/dp5145
        AB  - 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.
        KW  - experimental economics
KW  - tax equivalence
KW  - income tax
KW  - consumption tax
KW  - behavioral economics
        ER  -