Fiscal psychology past and present: Contemporary experiments validate historical hypotheses

Fiscal psychology is not a modern discipline. The history of economic thought leaves no doubt as to the fact that many of the notions of fiscal psychology as we know it today were present in the past. There are even cases, though these are not frequent, of economists and social scientists of the past who understood certain psychological aspects of the taxpayer which went out of fashion and of which contemporary fiscal psychology is not aware. Such is the fate of Amilcare Puviani (1854–1907), a marginalist in the tradition of Vilfredo Pareto and an advocate of the study of Italian Public Finance which was in vogue at the end of the 1800s and the early years of the 1900s. We have conducted a number of experiments to verify certain of Puviani’s theories regarding the behaviour of the taxpayer, all of which tested positively. Of particular interest is his concept that a minor tax levied contemporaneously with a heavier tax is better tolerated than if it is levied alone. Another related concept, not yet widely known to contemporary fiscal psychology, is of undoubted interest: a tax when levied under favourable circumstances is more tolerable. Finally, we verified Puviani’s hypothesis that a tax is easier to accept if split into a number of instalments of nominal amounts, and also (but this is applicable only to a certain category of tax payer) that an indirect tax is better supported if it is not specified in the price of the product or service being taxed.

► Social scientists of the past understood same psychological aspects of the tax payer.
► We present the Puviani’s Theory of Financial Illusion (1903).
► We tested Puviani’s laws regarded the behaviour of the taxpayer.
► We propose a scale for measuring perceived fiscal sacrifice.
► Sacrifice for a new tax associated with the payment of a higher tax is underestimated.