Episode 14 of the 4th Season of the NOVAFRICA Sustainable Development Talks was recorded with Ricardo Perez-Truglia, from the UC Berkeley – Haas School of Business.
Our guest talked about his paper entitled “Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending”.
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 measured how taxpayers perceive the destination of their tax dollars, such as the percentage of their property taxes that funds public schools. We find that even though accurate information is available, taxpayers still hold substantial misperceptions. We use an information-provision experiment to induce exogenous shocks to these perceptions. Using administrative data on property tax appeals, we measure the causal effect of perceived government spending on the willingness to pay taxes. We find that perceptions about government spending have a significant effect on the probability of filing a tax appeal and in a manner that is consistent with reciprocal motivation: individuals are more willing to pay taxes if they believe that the government services funded by those taxes will be of greater personal benefit to them. We discuss implications for the study of tax morale.