Most people dislike paying taxes.
Many people strongly dislike paying taxes.
No surprise, the tax aversion tendency is most prevalent among people who identify with political parties that generally favor less taxation.
Although this distaste could be rational on economic grounds, a recently published study shows that this attitude extends beyond simply disliking the costs incurred and affects behavior in “counternormative” ways … a phenomenon coined “ tax aversion”: a desire to avoid taxes per se that exceeds the rational economic motivation to avoid a monetary cost.
The researchers provide evidence that people have a stronger preference to avoid tax-related costs than to avoid equal-sized (or larger) monetary costs unrelated to taxes.
- For example, the proportion of Americans who said they’d travel 30 minutes to save 8% on an item by getting it tax-free was 29% bigger than the proportion who said they’d travel the same distance to get an ordinary 9% discount.
- Similarly, more than 4 times as many Americans said they’d rather invest in a bond that offered a $120 annual tax-free return than a bond that offered $160 but required a $40 tax.
The researchers say that tax aversion can be mitigated by identifying positive uses of tax payments.
The Homa Files 
August 30, 2012 at 12:14 pm |
It sounds crazy, but very few investors understand that the only important number at the end of the day is how many dollars they have in their pocket. Instead, they have been trained to look at statistics (like yield) that can hide the actual performance of a portfolio.