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Kimberly S. Krieg and Sarah C. Lyon
''Gender differences in preferences for income tax refunds''
( 2021, Vol. 41 No.3 )
The Tax Cuts and Jobs Act of 2017 (TCJA) provides a natural setting to examine taxpayer preferences for income tax refunds. An examination of the individual income tax formula reveals that an income tax refund is simply a function of the total tax owed (net of any tax credits) compared to the total tax already paid through withholdings and estimated tax payments. However, many taxpayers continue to focus on the size of their income tax refund, rather than the holistic picture of their total tax liability compared to their tax withholdings. Recent results examining the propensity for mental tax accounting and gender, and the economics literature focusing on female risk aversion, suggest that gender may play an important role in attitudes towards and preferences for certain tax behaviors. Thus, we investigate whether gender is a significant factor in preferences for income tax refunds. We survey U.S. taxpayers and find a significant gender difference related to receiving money as higher wages in a monthly paycheck or as a tax refund at the end of the year. Our results compliment prior studies in economics that document a consistent and significant relation between gender and risk-taking. Overall, we provide preliminary evidence that women may view income tax withholding as a low-risk investment and as a way to save.
Keywords: mental accounting, prospect theory, individual income tax, income tax withholding, gender, income tax refund, Tax Cuts and Jobs Act.
JEL: H1 - Structure and Scope of Government: General
D1 - Household Behavior: General
Manuscript Received : Feb 26 2021 Manuscript Accepted : Sep 17 2021

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