Hostname: page-component-cd9895bd7-7cvxr Total loading time: 0 Render date: 2024-12-22T02:43:46.281Z Has data issue: false hasContentIssue false
  • English
  • Français

Aligning taxes and spending: theory and experimental evidence

Published online by Cambridge University Press:  15 August 2019

DANIEL HEMEL  and
ETHAN PORTER Open the ORCID record for ETHAN PORTER [Opens in a new window]
DANIEL HEMEL
Affiliation:
University of Chicago Law School, Chicago, IL, USA
ETHAN PORTER*
Affiliation:
George Washington University School of Media and Public Affairs, Washington, DC, USA
*
*Correspondence to: Ethan Porter, School of Media and Public Affairs, George Washington University, 805 21st NW, Suite 424, Washington, DC 20052, USA. Email: evporter@gwu.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

Under what circumstances will members of the public hold positive attitudes toward new or higher taxes? While some scholars have posited that the practice of “earmarking” – designating tax revenues for a particular purpose – can increase support for taxes, the existing literature has not identified the conditions under which earmarking will prove effective in this regard. Here, we draw upon previous research on consumer behavior to hypothesize that support for earmarked taxes will be stronger when such taxes satisfy the criterion of “source–use alignment” (i.e., when the connection between the revenue source and the use for which those revenues are earmarked accords with familiar consumer fairness norms). Evidence in support of this hypothesis comes from two experiments on a sample of US residents matched to Census data, in which subjects were randomly assigned to read descriptions of hypothetical earmarked taxes with varying levels of alignment. Individuals consistently expressed stronger support for earmarked taxes that achieved source–use alignment as compared to earmarked taxes that did not satisfy the source–use alignment criterion. Our theory and results not only help to explain why some earmarked taxes are more popular than others, but also suggest a means for increasing public support for taxes.

Type
Article
Information
Behavioural Public Policy , Volume 6 , Issue 3 , July 2022 , pp. 464 - 484
Copyright
Copyright © Cambridge University Press 2019

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Asomaning, K. et al. (2008), ‘Second Hand Smoke, Age of Exposure and Lung Cancer Risk’, Lung Cancer, 61(1): 13–20.CrossRefGoogle ScholarPubMed
Baumol, W. J. (1972), ‘On the Taxation and Control of Externalities’, American Economic Review, 62(3): 307–22.Google Scholar
Bolton, L. E., and Alba, J. W. (2006), ‘Price Fairness: Good and Service Differences and the Role of Vendor Costs’, Journal of Consumer Research, 33(2): 258–265.CrossRefGoogle Scholar
Brett, C., and Keen, M. (2000), ‘Political Uncertainty and the Earmarking of Environmental Taxes’, Journal of Public Economics, 75(3): 315–340.CrossRefGoogle Scholar
Buell, R. W., Porter, E., and Norton, M. L. (2018), ‘Surfacing the Submerged State: Operational Transparency Increases Trust in and Engagement with Government’, Harvard Business School Marketing Unit Working Paper No. 14-034, Available at https://ssrn.com/abstract=2349801.Google Scholar
Campbell, A. L. (2009), ‘How Americans Think about Taxes: Lessons from the History of Tax Attitudes’, National Tax Association Proceedings, 102: 157–164.Google Scholar
Chen, H. (A.) et al. (2017), ‘Culture, Relationship Norms, and Dual Entitlement,’ Journal of Consumer Research, 45(1): 1–20.CrossRefGoogle Scholar
Congdon, W., Kling, J. R., and Mullainathan, S. (2009), ‘Behavioral Economics and Tax Policy’, National Tax Journal, 62(3): 375–386.CrossRefGoogle Scholar
Coppock, A., and McClellan, O. A. (2019), ‘Validating the demographic, political, psychological, and experimental results obtained from a new source of online survey respondents’, Research & Politics, 6(1): 1–14.CrossRefGoogle Scholar
Duhaime, E. P., and Apfelbaum, E. P. (2017), ‘Can information decrease political polarization? Evidence from the U.S. Taxpayer Receipt’, Social Psychological and Personality Science, 8(7): 736–745.CrossRefGoogle Scholar
Ferguson, J. L., Ellen, P. S., and Piscopo, G. H. (2011), ‘Suspicion and Perceptions of Price Fairness in Times of Crisis’, Journal of Business Ethics, 98(2): 331–349.CrossRefGoogle Scholar
Ferguson, J. L., and Ellen, P. S. (2013), ‘Transparency in Pricing and Its Effect on Perceived Fairness’, Journal of Product & Brand Management, 22(5/6): 404–412.CrossRefGoogle Scholar
Heimlich, J. P., and Jackson, C. (2018), Air Travelers in America: Findings of a Survey Conducted by Ipsos, Available at http://airlines.org/wp-content/uploads/2018/02/A4A-AirTravelSurvey-20Feb2018-FINAL.pdf.Google Scholar
Huntley, H. (2004), ‘Rule That Isn't Its Rule Upsets Pottery Barn’, St. Petersburg Times, April 20, Available at http://www.sptimes.com/2004/04/20/Business/Rule_that_isn_t_its_r.shtml.Google Scholar
Hsu, S.-L., Walters, J., and Purgas, A. (2008), ‘Pollution tax heuristics: An empirical study of willingness to pay higher gasoline taxes’, Energy Policy, 36(9): 3612–19.CrossRefGoogle Scholar
Kahneman, D., Knetsch, J. L., and Thaler, R. (1986), ‘Fairness As A Constraint On Profit Seeking: Entitlements in the Market’, American Economic Review, 76(4): 728–741.Google Scholar
Lamberton, C. (2013), ‘A Spoonful of Choice: How Allocation Can Increase Satisfaction with Tax Payments’, Journal of Public Policy and Marketing, 32(2): 223–238.CrossRefGoogle Scholar
Lamberton, C., De Neve, J.-E., and Norton, M. I. (2017), ‘The Power of Voice in Stimulating Morality: Eliciting Taxpayer Preferences Increases Tax Compliance’, Journal of Consumer Psychology, 28(2): 310–328.CrossRefGoogle Scholar
Lee, D. R., and Misolek, W. S. (1986), ‘Substituting pollution taxation for general taxation: Some implications for efficiency in pollutions taxation’, Journal of Environmental Economics and Management, 13(4): 338–347.CrossRefGoogle Scholar
Listokin, Y., and Schizer, D. M. (2013), ‘I Like To Pay Taxes: Taxpayer Support for Government Spending and the Efficiency of the Tax System’, Tax Law Review, 66(2): 179–215.Google Scholar
Luttmer, E. F. P., and Singhal, M. (2014), ‘Tax Morale’, Journal of Economic Perspectives, 28(4): 149–168.CrossRefGoogle Scholar
Malhotra, N., and Kuo, A. G. (2009), ‘Emotions as Moderators of Information Cue Use: Citizen Attitudes Toward Hurricane Katrina’, American Politics Research, 37(2): 301–326.CrossRefGoogle Scholar
McCaffery, E., (2014), ‘Behavioral Economics and the Law: Tax’, In Eyal Zamir and Doron Teichman (eds), The Oxford Handbook of Behavioral Economics and the Law, Oxford: Oxford University Press, 599–622.Google Scholar
McCaffery, E. J., and Barron, J. (2004), ‘The Political Psychology of Tax’, UCLA Law Review, 52(6): 1745–1792.Google Scholar
McCaffery, E. J., and Barron, J. (2006), ‘Thinking about tax’, Psychology, Public Policy, and Law, 12(1): 106–135.CrossRefGoogle Scholar
Musgrave, R. A. (2002), ‘Equity and the Case for Progressive Taxation’, In Thorndike, Joseph and Ventry, Dennis J. Jr., (eds), Tax Justice: The Ongoing Debate, Washington, DC: Urban Institute, 9–24.Google Scholar
Musgrave, R. A., and Musgrave, P. B. (1989), Public Finance in Theory and Practice, New York: McGraw Hill.Google Scholar
National Conference of State Legislatures (2018), Statewide Ballot Measures Database, Available at http://www.ncsl.org/research/elections-and-campaigns/ballot-measures-database.aspx.Google Scholar
National Institute on Alcohol Abuse and Alcoholism (2018), Alcohol Facts and Statistics, Available at https://www.niaaa.nih.gov/alcohol-health/overview-alcohol-consumption/alcohol-facts-and-statistics.Google Scholar
Parry, I.W.H., and Bento, A. (2001), ‘Revenue Recycling and the Welfare Effects of Road Pricing’, Scandinavian Journal of Economics, 103(4): 645–71.CrossRefGoogle Scholar
Perez, Arturo (2008), ‘Earmarking State Taxes’, National Conference of State Legislatures, Available at http://www.ncsl.org/documents/fiscal/earmarking-state-taxes. pdf.Google Scholar
Pigou, A. C. (1932), The Economics of Welfare, 4th ed., London: Macmillan and Co.Google Scholar
Ramseur, J. L. (2019), ‘The Oil Spill Liability Trust Fund Tax: Background and Reauthorization Issues in the 116th Congress’, Congressional Research Service: In Focus, April 3.Google Scholar
Rivlin, A. (1989), ‘The Continuing Search for a Popular Tax’, American Economic Review, 79(2): 113–17.Google Scholar
Saelen, H., and Kallbekken, S. (2011), ‘A Choice Experiment on Fuel Taxation and Earmarking in Norway’, Ecological Economics, 70(11): 2181–90.CrossRefGoogle Scholar
Sears, D. O. and Citrin, J. (1985), Tax Revolt: Something For Nothing in California, Cambridge, Massachusetts: Harvard University Press.Google Scholar
Skocpol, T. and Williamson, V. (2012), The Tea Party and the Remaking of Republican Conservatism, New York, New York: Oxford University Press.CrossRefGoogle Scholar
Steg, L., Dreijerink, L., and Abrahamse, W. (2006), ‘Why Are Energy Policies Acceptable and Effective?’, Environment and Behavior, 38(1): 92–111.CrossRefGoogle Scholar
Tahk, S. C. (2013), ‘Making Impossible Tax Reform Possible’, Fordham Law Review, 81(5): 2683–2728.Google Scholar
Tahk, S. C. (2015), ‘Public Choice Theory and Earmarked Taxes’, Tax Law Review, 68(4): 755–95.Google Scholar
Terkla, D. (1984), ‘The Efficiency Value of Effluent Tax Revenues’, Journal of Environmental Economics and Management, 11(2): 107–123.CrossRefGoogle Scholar
Tullock, G. (1967), ‘Excess Benefit’, Water Resources Research, 3(2): 291–305CrossRefGoogle Scholar
Wagenaar, A. C., et al. (2000), ‘Public Opinion on Alcohol Policies in the United States: Results from a National Survey’, Journal of Health Policy, 21(3): 303–27.CrossRefGoogle ScholarPubMed
Whelan, J. et al. (2016), ‘Consumer Regulation Strategies: Attenuating the Effect of Consumer References in a Voting Context’, Psychology & Marketing, 33(1): 899–916.CrossRefGoogle Scholar
Wicksell, K. (1958), ‘A New Principle of Just Taxation.’ Buchanan, J.M. (trans.), In Musgrave, R. A. and Peacock, A. T. (eds), Classics in the Theory of Public Finance, New York: St. Martin's Press.Google Scholar
Williamson, Vanessa (2017), Read My Lips: Why Americans Are Proud to Pay Taxes, Princeton, New Jersey: Princeton University Press.Google Scholar
Supplementary material: PDF

Hemel and Porter supplementary material

Appendix

Download Hemel and Porter supplementary material(PDF)
PDF 1.6 MB