Question

I want to get Congress to pass a reduction in the corporate income tax rate. The proposed reduction would cut the rate from 35% to 20%. Behavioral economics tells me that I should

a.   point out that the proposal would reduce the tax rate by 15 percentage points’

b. point out that it would reduce the tax rate by 43%.

Answer 1

Behavioral economics suggests that the tax cut if seen in terms of percentage than percentage points would be more beneficial.

Reason being that the companies or corporate firms or even individuals go by figures, even when they are rational. Despite rationality, they would prefer a higher percentage of tax cut even when the tax cut in percentage point is of same meaning.

So as behavioural economics,i should point out the 43%reduction in tax. Option B)

(You can comment for doubts)