55 Pages Posted: 30 Oct 2009
These days it really does seem like "only the little people pay taxes." Whether they are from the world of politics, sports or entertainment, the elites of this country are demonstrating a penchant for not paying their taxes. Nevertheless, Americans in general continue to exhibit a high degree of tax compliance. Why do most people pay their taxes? What distinguishes them from those who cheat? What can we learn from these differences that could promote greater compliance amoung noncompliant segments of the populace?
This article examines these questions in light of the relevant social science literature. As a general matter, empirical research regarding tax compliance finds that the conventional analysis of compliance in terms of penalties and enforcement activity only represents a piece of the overall compliance dynamic. Beyond such deterrence mechanisms an individual‘s taxpaying behavior is shaped by a wide variety of cultural, institutional, and individual factors. When a confluence of such factors exists within a society they create a cultural norm in favor of honoring one‘s tax obligations that is persistent and self-reinforcing, a "taxpaying ethos." This article hightlights the most relevant factors contributing to the creation of a taxpaying ethos and utilizes them to create a framework for promoting increased tax compliance among historically reticent groups of taxpayers. Part II of this article reviews the inadequacy of the traditional deterrence approach to tax compliance and contrasts it with the taxpaying ethos explanation. Part III examines the empirically identified factors influencing a society's taxpaying commitment. Part IV translates these factors into general policy prescriptions aimed a cultivating a taxpaying ethos in a society.
Keywords: taxes, taxpayer, income taxes, tax cheat, tax compliance
JEL Classification: K1
Suggested Citation: Suggested Citation
Lavoie, Richard, Flying Above the Law and Under the Radar: Instilling a Taxpaying Ethos in Those Playing by Their Own Rules. Pace Law Review, Vol. 29, 2009; U of Akron Legal Studies Research Paper No. 09-12. Available at SSRN: https://ssrn.com/abstract=1496547