Tax Affinity Hypothesis: Do We Really Hate Paying Taxes?

This thesis proposes and evaluates the tax affinity hypothesis claiming that people derive utility from paying tax. Slutsky-like equations are derived for the unique three-good utility maximization problem with leisure as the only choice variable. There is evidence for the tax affinity hypothesis from the history of the U.S. income tax, surveys, field data, and experimental data. The data from the controlled experiment show significant support for the two testable propositions: subjects worked more in the presence of tax and the change in their labor supply depended on both the net wage rate and the tax rate. The data also indicate that the impact of tax affinity is the greatest for the high- and low-income population. The tax affinity hypothesis has important policy implications. This thesis extends the tax affinity model into income tax evasion and female labor participation models and predicts behavioral deviations from the standard models.