Perceptions and outcomes of a fiscal bonus: Framing effects on evaluations and usage intentions

Is presenting a fiscal bonus as an income increase (a gain) the same as presenting it as a tax\r\nrebate (a loss reduction)? This paper aims to answer this question with two studies. Study\r\n1 is a survey carried out in Italy to explore citizens’ perceptions of a fiscal reform introduced\r\nin 2005. It shows both effects imputable to the methods used to describe the bonus\r\nand differences between respondents belonging to different occupational groups. But it\r\ndoes not allow disentangling these factors. Study 2 aims to investigate whether and how\r\n(1) the frame used to describe a fiscal bonus and (2) taxpayers’ occupational status, influence\r\ntheir evaluation of this tax reduction and the uses they intend to make of it. To this\r\nend, 252 participants belonging to different occupational groups were submitted to two\r\nbetween-subject framing conditions (the bonus being described as a reduced loss or as a\r\ngain). They were then asked to evaluate the bonus’ importance for their personal wealth\r\nand to state how they intended to use it. Results demonstrate that the frame, rather than\r\nthe occupational status of the respondent, influences taxpayers’ responses to the bonus.\r\nRespondents attached a higher importance to the bonus and were keener to save it when\r\nit was described as a loss reduction, compared to it being presented as a gain. These results\r\nare interpreted with reference to Prospect Theory, producing new insights into the processes\r\nthrough which framing can affect fiscal policy evaluations. The study is also relevant\r\nfrom a pragmatic perspective, as it shows that the way fiscal policy is communicated can\r\nbe decisive for the achievement of economic and political goals.