Fiscal illusion refers to a systematically biased perception of fiscal parameters, due to demand-side error/ignorance or supply-side abusive behaviour. As such it is a component of a more general tax choice framework.
This paper focuses predominantly on the empirical estimation of the four major sources of fiscal illusion, namely the flypaper effect, renter illusion and the complexity and elasticity of tax systems. The results — based on a dataset of 302 Flemish municipalities — on balance suggest the existence of important illusionary effects.
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We thank Prof. Dr. R.S. Gassler, Prof. Dr. M. Jegers, Prof. Dr. J. Vuchelen and an anonymous referee for helpful comments.
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Heyndels, B., Smolders, C. Fiscal illusion at the local level: Empirical evidence for the Flemish municipalities. Public Choice 80, 325–338 (1994). https://doi.org/10.1007/BF01053224
- Empirical Evidence
- Local Level
- Public Finance
- Empirical Estimation
- Abusive Behaviour