Eliciting taxpayer preferences increases tax compliance
By: Cait Lamberton, Jan-Emmanuel De Neve, Michael I. Norton
Contributors: Norton, Michael I., author; De Neve, Jan-Emmanuel, author; Harvard Business School
Series: Working paper / Harvard Business School -- 14-106; Working paper (Harvard Business School) -- 14-106.
Publisher: Harvard Business School
Published: 2014
Place of publication: Boston]
Language: eng
Number of pages: 58
Description: Two experiments show that eliciting taxpayer preferences on government spending -- providing taxpayer agency -- increases tax compliance. We first create an income and taxation environment in a laboratory setting to test for compliance with a "lab tax." Allowing a treatment group to express non-binding preferences over tax spending priorities leads to a 16% increase in tax compliance. A follow-up online study tests this treatment with a simulation of paying US federal taxes. Allowing taxpayers to signal their preferences on the distribution of government spending results in a 15% reduction in the stated take-up rate of a questionable tax loophole. Providing taxpayer agency recouples tax payments with the public services obtained in return, reduces general anti-tax sentiment, and holds satisfaction with tax payment stable despite increased compliance with tax dues. With tax noncompliance costing the U.S. government $385 billion annually, providing taxpayer agency could have meaningful economic impact. At the same time, giving taxpayers a voice may act as a two-way "nudge," transforming tax payment from a passive experience to a channel of communication between taxpayers and government.
Notes: "April 2014" -- Publisher's website.

Includes bibliographical references (pages 21-25).