How Choice Can Detoxify Taxes
(excerpted from Your Money, Your Choice Rethinking Taxes: Proud to Pay
by Cait Lamberton)
According to experimental research I’ve conducted looking into the efficacy of tax choice, permitting taxpayers to allocate even a small percentage of their income tax to the programs of their choice generates significant increases in taxpayer satisfaction. Further, taxpayers’ allocations reveal a strong preference for more butter and fewer guns. Thus, allowing taxpayers some choice in where their taxes go may slowly shift the nation’s spending priorities toward more socially productive investments.
Beyond these effects, tax choice enables individuals to compete more effectively with moneyed interests in policy-making. The politics of tax choice are appealing as well, drawing on both libertarian and conservative themes of individual empowerment and agency, as well as the progressive belief in good government. Tax choice would resonate across a broad political spectrum, and directly engage citizens in the administration of the republic.
Will tax choice work? To answer the question, I conducted a lab experiment and follow-up survey looking into taxpayers’ views on paying taxes. A total of 902 taxpayers-aged 20-91 and spread across a nationally representative range of ethnicities, income levels, marginal tax brackets, and political affiliations-participated in the study.
In the experiment, all respondents completed an online survey that asked them to identify their primary sources of media exposure, filing status, and income bracket, and another survey inquiring about their satisfaction with paying their taxes, captured on a seven-point scale ranging from “not at all satisfied” to “very satisfied.” The respondents were divided into four groups, each of which was given a different treatment.
A quarter of our respondents were simply told to fill out the two surveys and given no additional information or an option to allocate their tax dollars. We called this the “uninformed no-choice” group.
Another quarter of the experimental respondents did the same thing, but were also given a pie chart showing the breakdown of income tax dollars across the discretionary portions of the federal budget: military spending; agriculture, commerce, and transportation; international affairs; energy, environment, and science; housing and community development; education, training, and social services; and anti-poverty programs. We called this the “informed no-choice” group.
Another group of respondents was not given this baseline information, but did have a chance to allocate 10 percent of their income tax dollars across those same budget categories. We called this the “uninformed choice” condition.
Finally, a quarter of the participants were shown the current allocation of federal dollars and given the opportunity to allocate 10 percent of their income tax payment across the same categories-the “informed choice” condition.
The results were fascinating. Both uninformed and informed choosers were significantly more satisfied with paying taxes than either group of no-choice taxpayers. According to our analysis, choosers’ increased satisfaction was associated with a sense that they had allocated in a way that benefited others. This sense of social benefit, in turn, predicted higher satisfaction with payment.
Perhaps more important, people given the opportunity to allocate a portion of their tax dollars had a weaker sense that paying taxes was a restriction on their freedom-they had lower general reactance toward taxes. These results held regardless of ethnicity, age, income, political affiliation, and conservative or liberal media exposure. As a whole, the results demonstrate that tax choice substantially increases individuals’ sense of benefit from paying taxes and reduces their sense of frustration toward payment in general.
One significant benefit that tax choice portends is its moderating effect on the United States’s inflated spending on defense. Tax choice also has implications for the distribution of political power. Tax choice restores some of the citizen’s voice. While hardly a comprehensive solution, tax choice can mitigate the problem of unequal democracy by permitting individual taxpayers to speak with their taxes, without draining their own disposable income.
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