Civic virtue is a chief reason why people pay taxes. Civic virtue “is the cultivation of habits of personal living that are claimed to be important for the success of the community,” according to one definition.
Civic virtue is a notion that goes back to the ancient republics of Athens and Rome. Paying taxes out of a sense of civic virtue connects to what it means, for many, to be a good citizen. It is a duty of citizenship to pay a portion of one’s income to support public works and community institutions.
Civic virtue is also a lever that those in power can pull. Appeals to the intrinsic motivation of civic virtue go back to ancient times, my colleague and tax expert Joel Slemrod says, citing this quote from Babylonia: “Why have you not sent to Babylon the 30 lambs as your tax? Are you not ashamed of such behavior?”
We no longer pay taxes with lambs, but we get similar appeals and exhortations. During wartime, appeals to patriotism raise money for the effort, such as sales of war bonds. This practice goes way back, too. Positive attitudes about tax compliance (the opposite of tax evasion) go up when a country is engaged in more and longer conflicts, according to Joel’s research.
But the relationship is complex: Positive attitudes about tax compliance go down when there are more war causalities. Hmmm… Where does that put us on Tax Day 2010, given the prolonged and deadly wars in Iraq and Afghanistan?
Cultivating civic virtue as a means of tax compliance has an uneasy relationship with strategies of deterrence—using the threats of audits, fines, and jail for tax evasion. Strengthening deterrence (for example, raising the probability of an audit or the amount of fines) may “crowd out” virtuous behavior. Why? Because it changes paying taxes from something we want to do to be a good citizen to something we have to do under threat of punishment.
Does civic virtue motivate you to pay your taxes?
(This week I am indebted to my colleague Joel Slemrod—the world’s leading expert on taxes—for sharing his knowledge and insights with me. He is the Paul W. McCracken Collegiate Professor of Business Economics and Public Policy at the Ross School of Business and Director of the Office of Tax Policy Research.)
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