Skip to main content
SpringerLink
Log in

Progressive taxation and tax morale

  • Published:
Public Choice Aims and scope Submit manuscript

Abstract

Due to strong evidence indicating that tax morale affects actual tax-paying behavior, finding the determinants of tax morale could help both to understand and to fight tax evasion. In this paper we analyze the effect of progressive taxation on individual tax morale using a cross-country approach—a research question that has not been investigated in the existing literature. Our theoretical analysis leads to two testable predictions. First, an individual’s tax morale is higher, the more progressive the tax schedule is. Second, the positive impact of tax progressivity on tax morale declines with income. In our empirical analysis we make use of a unique dataset of tax progressivity measures, namely the World Tax Indicators, and follow most of the tax morale literature by employing the World Values Survey to measure individual tax morale. Controlling for a wide range of potential confounders, we are able to confirm both hypotheses in our empirical analysis.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Ackert, L. F., Martinez-Vazquez, J., & Rider, M. (2007). Social preferences and tax policy design: some experimental evidence. Economic Inquiry, 45(3), 487–501.

    Article  Google Scholar 

  • Ainsworth, M., & Filmer, D. (2002). Poverty, AIDS and children’s schooling: a targeting dilemma (Policy Research working paper No. 2885). The World Bank.

  • Alesina, A., Di Tella, R., & MacCulloch, R. (2004). Inequality and happiness: are Europeans and Americans different? Journal of Public Economics, 88(9–10), 2009–2042.

    Article  Google Scholar 

  • Alesina, A., & Giuliano, P. (2011). Preferences for redistribution. In J. Benhabib, A. Bisin, & M. O. Jackson (Eds.), Handbook of social economics (pp. 93–131). Amsterdam: North-Holland.

    Chapter  Google Scholar 

  • Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, 1(3–4), 323–338.

    Article  Google Scholar 

  • Alm, J., & Gomez, J. L. (2008). Social capital and tax morale in Spain. Advances in Economic Analysis & Policy, 38(1), 73–87.

    Google Scholar 

  • Alm, J., & Torgler, B. (2006). Culture differences and tax morale in the United States and in Europe. Journal of Economic Psychology, 27(2), 224–246.

    Article  Google Scholar 

  • Alm, J., McClelland, G. H., & Schulze, W. D. (1992). Why do people pay taxes? Journal of Public Economics, 48(1), 21–38.

    Article  Google Scholar 

  • Alm, J., Martinez-Vazque, J., & Torgler, B. (2006). Russian attitudes toward paying taxes—before, during, and after the transition. International Journal of Social Economics, 33(12), 832–857.

    Article  Google Scholar 

  • Anderson, G. M., Martin, D. T., & Tollison, R. D. (1987). Do tax loopholes increase or decrease tax revenue? Journal of Public Finance and Public Choice, 5, 83–95.

    Google Scholar 

  • Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36(2), 818–860.

    Google Scholar 

  • Atkinson, A. B., & Brandolini, A. (2011). On the identification of the “middle class”. In J. C. Gornick & M. Jaentti (Eds.), Inequality and the status of the middle class. Stanford: Stanford University Press.

  • Becker, G. S. (1968). Crime and punishment: an economic approach. Journal of Political Economy, 76(2), 169–217.

    Article  Google Scholar 

  • Bellemare, C., Kroeger, S., & v. Soest, A. (2008). Measuring inequity aversion in a heterogeneous population using experimental decisions and subjective probabilities. Econometrica, 76(4), 815–839.

    Article  Google Scholar 

  • Corneo, G., & Gruener, H. P. (2002). Individual preferences for political redistribution. Journal of Public Economics, 83(1), 83–107.

    Article  Google Scholar 

  • Cummings, R. G., Martinez-Vazquez, J., McKee, M., & Torgler, B. (2009). Tax morale affects tax compliance: evidence from surveys and an artefactual field experiment. Journal of Economic Behavior & Organization, 70(3), 447–457.

    Article  Google Scholar 

  • Dell’Anno, R. (2009). Tax evasion, tax morale and policy maker’s effectiveness. The Journal of Socio-Economics, 38(6), 988–997.

    Article  Google Scholar 

  • Eckel, C., & Gintis, H. (2010). Blaming the messenger: notes on the current state of experimental economics. Journal of Economic Behavior & Organization, 73(1), 109–119.

    Article  Google Scholar 

  • Elffers, H., Weigel, R. H., & Hessing, D. J. (1987). The consequences of different strategies for measuring tax evasion behavior. Journal of Economic Psychology, 8(3), 311–337.

    Article  Google Scholar 

  • EVS/WVS (2006). European and World Values Surveys four-wave integrated data file, 1981–2004. Surveys designed and executed by the European Values Study Group and World Values Survey Association. Resource document. http://worldvaluessurvey.org/. Accessed June 2010.

  • Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. The Quarterly Journal of Economics, 114(3), 817–868.

    Article  Google Scholar 

  • Fehr, E., & Schmidt, K. M. (2006). The economics of fairness, reciprocity and altruism—experimental evidence and new theories. In S.-C. Kolm & J. M. Ythier (Eds.), Foundations, handbook on the economics of giving, altruism and reciprocity (Vol. 1, pp. 615–691). Amsterdam: Elsevier.

    Google Scholar 

  • Feld, L. P., & Frey, B. S. (2007). Tax compliance as the result of a pychological tax contract: the role of incentives and responsive regulation. Law & Policy, 29(1), 102–120.

    Article  Google Scholar 

  • Fong, C. (2001). Social preferences, self-interest, and the demand for redistribution. Journal of Public Economics, 82(2), 225–246.

    Article  Google Scholar 

  • Frey, B. S., & Feld, L. P. (2002). Deterrence and morale in taxation (CESifo working paper No. 760).

  • Frey, B. S., & Torgler, B. (2007). Tax morale and conditional cooperation. Journal of Comparative Economics, 35(1), 136–159.

    Article  Google Scholar 

  • Gueth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of Economic Behavior & Organization, 3(4), 367–388.

    Article  Google Scholar 

  • Halla, M. (2010). Tax morale and compliance behavior: first evidence on a causal link (Johannes Kepler University of Linz working paper No. 1066).

  • Heinemann, F. (2010). Economic crisis and morale. European Journal of Law and Economics, 1–15.

  • Heinemann, F., & Hennighausen, T. (2010). Don’t tax me? Determinants of individuals towards progressive taxation (ZEW discussion paper No. 10-017).

  • Heinemann, F., & Kocher, M. G. (2010). Tax compliance under tax regime changes (Munich discussion paper 2010-17).

  • Hull, B. B. (2000). Religion still matters. Journal of Economics, 26(2), 35–48.

    Google Scholar 

  • Inglehart, R. (2000). Codebook for World values survey. Ann Arbor: Institute for Social Research.

    Google Scholar 

  • Inglehart, R. (2010). Values change the world. Resource document. http://worldvaluessurvey.org/. Accessed April 2010.

  • Kahneman, D., Knetsch, J., & Thaler, R. H. (1986). Fairness as a constraint on profit seeking: entitlements in the market. American Economic Review, 76(4), 728–741.

    Google Scholar 

  • Konow, J. (2003). Which is the fairest one of all? A positive analysis of justice theories. Journal of Economic Literature, 41(4), 1188–1239.

    Article  Google Scholar 

  • Konrad, K. A., & Qari, S. (2009). The last refuge of a scoundrel? Patriotism and tax compliance (IZA discussion paper series No. 4121).

  • Martinez-Vazquez, J., & Torgler, B. (2009). The evolution of tax morale in modern Spain. Journal of Economic Issues, 43(1), 1–28.

    Article  Google Scholar 

  • McKinnish, T. (2007). Welfare-induced migration at state borders: new evidence from micro-data. Journal of Public Economics, 91(3–4), 437–450.

    Article  Google Scholar 

  • Moulton, B. R. (1986). Random group effects and the precision of regression estimates. Journal of Econometrics, 32(3), 385–397.

    Article  Google Scholar 

  • OECD (2008). Growing unequal? Income distribution and poverty in OECD countries. Paris: Organisation for Economic Co-Operation and Development.

    Google Scholar 

  • Peter, K. S., Buttrick, P., & Duncan, D. (2010). Global reform of personal income taxation, 1981–2005: evidence from 189 countries. National Tax Journal, 63(3), 447–478.

    Google Scholar 

  • Pommerehne, W. W., & Weck-Hannemann, H. (1996). Tax rates, tax administration and income tax evasion in Switzerland. Public Choice, 88(1–2), 161–170.

    Article  Google Scholar 

  • Richardson, G. (2006). Determinants of tax evasion: a cross-country investigation. Journal of International Accounting, Auditing and Taxation, 15(2), 150–169.

    Article  Google Scholar 

  • Slemrod, J. (2003). Trust in public finance. In S. Cnossen & H.-W. Sinn (Eds.), Public finance and public policy in the new century (pp. 49–88). Cambridge: MIT Press.

    Google Scholar 

  • Slemrod, J. (2007). Cheating ourselves: the economics of tax evasion. Journal of Economic Perspectives, 21(1), 25–48.

    Article  Google Scholar 

  • Slemrod, J., & Yitzhaki, S. (2002). Tax avoidance, evasion, and administration. In A. J. Auerbach, & M. Feldstein (Eds.), Handbook of public economics (Vol. 3, pp. 1423–1470). Amsterdam: Elsevier.

    Google Scholar 

  • Tittle, C. (1980). Sanctions and social deviance: the question of deterrence. New York: Praeger.

    Google Scholar 

  • Torgler, B. (2002). Speaking to theorists and searching for facts: tax morale and tax compliance in experiments. Journal of Economic Surveys, 16(5), 657–683.

    Article  Google Scholar 

  • Torgler, B. (2004). Tax morale in Asian countries. Journal of Asian Economics, 15(2), 237–266.

    Article  Google Scholar 

  • Torgler, B. (2005). Tax morale in Latin America. Public Choice, 122(1–2), 133–157.

    Article  Google Scholar 

  • Torgler, B. (2006). The importance of faith: tax morale and religiosity. Journal of Economic Behavior & Organization, 61(1), 81–109.

    Article  Google Scholar 

  • Torgler, B. (2007). Tax compliance and tax morale: a theoretical and empirical analysis. Cheltenham: Edward Elgar.

    Google Scholar 

  • Torgler, B., & Schneider, F. (2009). The impact of tax morale and institutional quality on the shadow economy. Journal of Economic Psychology, 30(2), 228–245.

    Article  Google Scholar 

  • Torgler, B., Demir, I. C., Macintyre, A., & Schaffner, M. (2008). Causes and consequences of tax morale: an empirical investigation. Economic Analysis and Policy (EAP), 38(2), 313–339.

    Google Scholar 

  • World Bank (2010). The Word Development Indicators. Resource document. http://databank.worldbank.org/. Accessed June 2010.

  • Wu, S.-Y., & Teng, M.-J. (2005). Determinants of tax compliance. A cross-country analysis. Finanzarchiv, 61(3), 393–417.

    Article  Google Scholar 

  • Yitzhaki, S. (1974). A note on income tax evasion: a theoretical analysis. Journal of Public Economics, 3(2), 201–202.

    Article  Google Scholar 

  • Young, M., Reksulak, M., & Shughart II, W. F. (2001). The political economy of the IRS. Economics and Politics, 13(2), 201–220.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Cologne Graduate School in Management, Economics and Social Sciences (CGS), University of Cologne, Cologne, Germany

    Philipp Doerrenberg & Andreas Peichl

  2. Institute for the Study of Labor (IZA), P.O. Box 7240, 53072, Bonn, Germany

    Philipp Doerrenberg & Andreas Peichl

  3. ISER, Colchester, UK

    Andreas Peichl

  4. CESifo, Munich, Germany

    Andreas Peichl

Authors
  1. Philipp Doerrenberg
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Andreas Peichl
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Andreas Peichl.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Doerrenberg, P., Peichl, A. Progressive taxation and tax morale. Public Choice 155, 293–316 (2013). https://doi.org/10.1007/s11127-011-9848-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11127-011-9848-1

Keywords

JEL Classification

Search

Navigation