Document Type

Article

Publication Date

2013

Abstract

Why do people pay taxes? The simplest answer is that they have a legal obligation to do so. But it has long been recognized that this legal obligation alone provides an inadequate explanation for taxpaying behavior, just as legal obligations generally offer an inadequate explanation for most law-abiding activity.Another answer, then, is that some people pay taxes because – like Oliver Wendell Holmes – they like to do so. In other words, they appreciate that the government provides a vast array of public goods, such as rule of law, roads, schools, and aid to the poor, and find satisfaction in contributing to the public welfare.

This Article is based on a simple proposition, which we believe but cannot prove: that our tax system will be more effective if taxpayers support the way their tax dollars are spent. We believe they are more likely to comply voluntarily and less likely to change their behavior to avoid tax. To show that our claim is plausible, we offer direct evidence from a literature involving experiments. We also draw on the more general economics and psychology literature on pro-social behavior – that is, the propensity to provide for public goods without any economic reason for doing so. In addition, we invoke philanthropy as a "real world" analogy, since charitable donors contribute money voluntarily (indeed, 2% of the U.S. gross domestic product (GDP)), largely because they support the way their contributions are used.

Disciplines

Law | Tax Law

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