49 Pages Posted: 15 Sep 2015 Last revised: 22 Mar 2016
Date Written: October 1, 2015
Technology is revolutionizing our lives. With the touch of a button or a simple voice command, we can instantly order groceries, get directions, or find the nearest sushi restaurant. Sensibly, the private sector has capitalized on these recent innovations to drive up profits. To sell more laundry detergent, Amazon now enables consumers to order refills by simply pressing the “dash button” mounted above their laundry machines. Starbucks lures more customers by allowing them to pre-order online and have their drink waiting when they arrive at the store. The theory behind this approach is simple: if you want someone to use your product or service, you should make it as quick and easy as possible for them to do so.
This Article makes a novel argument to extend this line of reasoning to encourage better compliance with the tax laws. In making this argument, the Article draws upon behavioral science research showing that complexity impacts individuals’ decision making and encourages dishonesty. The Article then offers a number of proposals for how policymakers could simplify individuals’ interactions with the tax system. For example, the IRS could allow taxpayers to easily record their income and deductions online during the year using smart phones or tablets. Those items could be stored in an online personal taxpayer account and, at the end of the year, automatically uploaded to an electronic return. Easing the burden of taxpaying should encourage more taxpayers to report honestly, in addition to reducing their compliance costs. In the same way that designing products or websites to be user-friendly encourages their use, making the tax system more user-friendly should attract more voluntary participation.
Keywords: Tax Evasion, Tax Compliance, Behavioral Economics, Law & Economics, Nudges, Tax Policy, Tax Simplification
JEL Classification: E62, H20, H21,H24, H26, H29, H30, K34, A12, K42
Suggested Citation: Suggested Citation
Thomas, Kathleen DeLaney, User-Friendly Taxpaying (October 1, 2015). Indiana Law Journal, Forthcoming; UNC Legal Studies Research Paper No. 2660218. Available at SSRN: https://ssrn.com/abstract=2660218 or http://dx.doi.org/10.2139/ssrn.2660218