behavioral tax economics

Behavioral tax economics explores how psychological factors influence people's attitudes and behaviors toward taxes. Unlike traditional economics, which assumes individuals make rational decisions to maximize utility, behavioral tax economics recognizes that emotions, biases, and social norms can affect tax compliance and reporting. For example, individuals may underreport income due to loss aversion or overestimate the benefits of tax deductions due to optimism bias. By understanding these behaviors, policymakers can design better tax systems and incentives that encourage compliance and fair contributions, ultimately enhancing the overall effectiveness of tax administration.