Uncovering Heterogeneity in Income Tax Perceptions∗

This paper uses a finite mixture model to uncover heterogeneous income tax rate perceptions, establishing four new results. First, almost half of respondents do not distinguish between marginal and average tax rates. Second, roughly 30 percent of respondents know the statutory marginal tax rates schedule (and answer questions accordingly). Third, among respondents who think all income is taxed at the same rate, roughly 40 percent think all of their income is taxed at the statutory marginal tax rate. Finally, respondents with higher cognitive ability are more likely to report statutory marginal tax rates, but only among respondents who prepare their own income tax returns.