Tax awareness and reform of the welfare state: Hungarian survey results

This paper reports the results of a survey on the tax awareness of the Hung arian population. Knowledge of tax types and levels is investigated, follow ed by questions on preferences for state expenditures. The design of the su rvey is aimed at a contingent evaluation of public sector involvement in he alth, pensions and higher education. The results show that fiscal illusions have their roots in poor knowledge of the tax cost of public expenditures. When people are provided with additional information on these factors, pre ferences for state involvement seem to diminish. Possible reform scenarios can be modelled with alternative formulations of institutional arrangements . Respondents tend to have most support for mixed strategies, while 'pure s tate' and 'pure market' solutions receive the lowest levels of support. How ever, since the outcome of any public sector reforms depends heavily on eva luation of the current regimes, an extensive part of the paper is devoted t o the investigation of the 'status quo effect'. The paper, though descripti ve in general, provides normative evaluations and suggestions for further r eforms.