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The politics of digits: evidence of odd taxation

Abstract

From the concept of odd pricing, i.e., setting rightmost price digits below a whole number, this paper advances the political counterpart of odd taxation using a panel of Danish municipal taxes. First, the distribution of tax decimals is non-uniform and resembles the distribution of price-endings data. Second, nine-ending and other higher-end decimals are found to be over-represented which echoes odd pricing research. It suggests that incumbents take voters’ biases into account and apply odd taxes to minimize the political costs of taxation while maximizing revenue. Attention should be given to how policy digits are arranged to exploit voters’ cognitive biases.

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Correspondence to Asmus Leth Olsen.

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Olsen, A.L. The politics of digits: evidence of odd taxation. Public Choice 154, 59–73 (2013). https://doi.org/10.1007/s11127-011-9807-x

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Keywords

  • Tax policy
  • Cognitive biases
  • Policy digits
  • Incumbent behavior