Eliciting Taxpayer Preferences Increases Tax Compliance

57 Pages Posted: 11 Dec 2013 Last revised: 24 Apr 2014

Cait Poynor Lamberton

University of Pittsburgh - Katz Graduate School of Business

Jan‐Emmanuel De Neve

University of Oxford

Michael I. Norton

Harvard Business School - Marketing Unit

Date Written: April 24, 2014

Abstract

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 US 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.

JEL Classification: D03, H26, H30, H50, I31

Suggested Citation

Lamberton, Cait Poynor and De Neve, Jan‐Emmanuel and Norton, Michael I., Eliciting Taxpayer Preferences Increases Tax Compliance (April 24, 2014). Available at SSRN: https://ssrn.com/abstract=2365751 or http://dx.doi.org/10.2139/ssrn.2365751

Cait Poynor Lamberton

University of Pittsburgh - Katz Graduate School of Business ( email )

Marketing Department
364 Mervis Hall
Pittsburgh, PA 15260
United States

Jan-Emmanuel De Neve (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Michael I. Norton

Harvard Business School - Marketing Unit ( email )

Soldiers Field
Boston, MA 02163
United States

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