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Certain psychological tactics could increase tax compliance

It should come as no surprise that the vast majority of people don't like paying taxes. So why do we do it? Do we pay taxes because we feel a sense of patriotic duty, because it's the "right thing to do," or because it is mandatory?

According to a recent article in the New York Times, economists and social scientists are increasingly studying the psychology of tax compliance. Several studies in recent years have shown what works and what doesn't work.

Unsurprisingly, studies and experience demonstrate that people are more likely to cheat if they think no one is watching (and believe that they won't get caught). Moral appeals can be somewhat effective at increasing compliance, however; especially if the moral appeal is a direct call to action.

As an example, the New York Times listed two similar notices to be given to taxpayers. The first was a generalized message that said "Don't cheat." The second was a more personalized message that said "Don't be a cheater." The latter phrase is apparently more effective.

That being said, the most effective compliance tool is still the threat of negative consequences, including an audit. Moreover, research shows that the majority of taxpayers are more likely to pay what they owe if they receive any kind of personal alert reminding them that tax officials know who they are (and therefore, may be paying attention to their returns).

The IRS has been dealing for years with smaller and smaller budgets, which means that the agency has fewer resources to ensure and enforce tax compliance. In the future, we may just see some of these psychological tactics being put to use as a cost-effective way to get Americans to pay what they owe.

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