This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2023
  4. Program
« Back to Results

Saturday, Jan. 7, 2023 10:15 AM - 12:15 PM (CST)

Hilton Riverside, Grand Salon A Sec 6
Hosted By:
  • Chairs:
    John List, University of Chicago
  • Ricardo Perez Truglia, University of California-Berkeley

The $100 Million Nudge: Increasing Tax Compliance of Businesses and the Self-Employed using a Natural Field Experiment

John List
,
University of Chicago
Justin Holz
,
University of Chicago
Alejandro Zentner
,
University of Texas-Dallas

Abstract

https://www.nber.org/people/alejandro_zentner?page=1&perPage=50

This paper uses a natural field experiment to examine the effectiveness of specific nudges on tax compliance amongst firms and the self-employed in the Dominican Republic. In collaboration with the Dominican Republic’s tax authority, we designed messages for more than 28,000 self-employed workers and over 56,000 firms. Leveraging administrative tax data, we find evidence that our nudges (increasing the salience of prison sentences or public disclosure of tax evaders) have large effects on increasing tax compliance, primarily working through the channel of decreasing claimed tax exemptions. Interestingly, we find that firms are more impacted than the self-employed, and that firm size is critically linked to nudge effectiveness: larger firms are considerably more influenced by nudges than smaller firms. We find this latter result noteworthy given the paucity of evidence showing significant behavioral impacts of nudges amongst the largest players in a market. Overall, our messages increased tax revenue by $193 million (roughly 0.23% of the Dominican Republic’s GDP in 2018), with over $100 million constituting income that the government would not have received without our field experimental nudges.

Greener on the Other Side: Inequity and Tax Collection

Michael Best
,
Columbia University
Joana Naritomi
,
London School of Economics
François Gerard
,
Queen Mary University of London
Laura Zoratto
,
World Bank

Abstract

This paper studies the role that inequity---similar households being treated differently by tax policy---plays in determining compliance with taxation. We do this by combining quasi-experimental variation and rich administrative data on tax liabilities and tax compliance with experimental variation from a novel survey experiment raising the salience of inequity in the context of the municipal property tax in the city of Manaus, Brazil. Studying a 2011 reform, we find that taxpayers' compliance decisions respond both to their own and their neighbors' tax liabilities. When their relative standing improves, they become more likely to pay taxes, and vice versa. Our experimental evidence suggests that increasing the salience of inequity leads respondents to find it more acceptable that those disadvantaged by the tax system fail to comply with it. Our findings highlight an underappreciated additional cost of the widespread use of presumptive tax systems, exacerbating the constraints of limited tax capacity to identifying and redistributing between classes of taxpayers.

Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending

Matias Giaccobasso
,
University of California-Los Angeles
Brad Nathan
,
Columbia University
Ricardo Perez Truglia
,
University of California-Berkeley
Alejandro Zentner
,
University of Texas-Dallas

Abstract

https://www.nber.org/papers/w29789

Do perceptions about how the government spends tax dollars affect the willingness to pay taxes? We designed a field experiment to test this hypothesis in a natural, high-stakes context and via revealed preferences. We measure perceptions about the share of property tax revenues that fund public schools and the share of property taxes that are redistributed to disadvantaged districts. We find that even though information on where tax dollars go is publicly available and easily accessible, taxpayers still have significant misperceptions. We use an information-provision experiment to induce exogenous shocks to these perceptions. Using administrative data on tax appeals, we measure the causal effect of perceived government spending on the willingness to pay taxes. We find that some perceptions about government spending have a significant effect on the probability of filing a tax appeal and in a manner that is consistent with the classical theory of benefit-based taxation. We discuss implications for researchers and policy makers.

What Drives Tax Policy? Political, Institutional and Economic Determinants of State Tax Policy in the Past 70 Years

Alisa Tazhitdinova
,
University of California-Santa Barbara
Sarah Robinson
,
University of California-Santa Barbara

Abstract

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4035979

We study U.S. state tax rules over the past 70 years to shed light on the determinants of U.S. state tax policy, generating three key results. First, we show that long-term tax trends are not consistent with Tiebout sorting and race-to-the-bottom competition models. Second, we document evidence of increasing polarization of tax rates between Democratic and Republican states in the 1970s and from 2000 onward. Third, we use machine learning techniques to show that the timing and magnitude of tax changes are not driven by federal changes, economic needs, state politics, institutional rules, neighbor competition, or demographics. Altogether, these factors explain less than 20% of observed tax variation.