Working Paper | HBS Working Paper Series | 2014

Eliciting Taxpayer Preferences Increases Tax Compliance

by Cait Lamberton, Jan-Emmanuel De Neve and Michael I. Norton


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.

Keywords: Motivation and Incentives; Taxation; Public Administration Industry; United States;


Lamberton, Cait, Jan-Emmanuel De Neve, and Michael I. Norton. "Eliciting Taxpayer Preferences Increases Tax Compliance." Harvard Business School Working Paper, No. 14-106, April 2014.