Cognitive Bias & Taxes Review

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What is the difference between gross pay and net pay?

Back

Gross pay is before taxes and deductions are subtracted; Net pay is your take-home pay.

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What is payroll tax?

Back

A tax that employees pay at a standard rate of 7.65% on their wages, salaries, and tips.

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What is the Sunk Cost Fallacy?

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The tendency to continue an endeavor once an investment in money, effort, or time has been made, even if it is not the best decision.

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What is Action Bias?

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The tendency to take action in uncertain situations, believing that doing something is better than doing nothing.

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What are state income taxes?

Back

Taxes imposed by a state on the income of its residents.

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What is the Endowment Effect?

Back

The psychological phenomenon where people value something more highly simply because they own it.

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What is Risk Loss Aversion?

Back

The tendency to prefer avoiding losses over acquiring equivalent gains.

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What is Hedonic Adaptation?

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The observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events.

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What is the significance of non-refundable entry fees in decision making?

Back

They can lead to the Sunk Cost Fallacy, where individuals feel compelled to continue with a decision due to prior investments.

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What is the impact of living in a state without income tax?

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Residents may pay higher overall taxes through other means, such as sales tax or property tax.