Public Choice

, Volume 155, Issue 3–4, pp 293–316 | Cite as

Progressive taxation and tax morale



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.


Tax morale Tax compliance Progressivity Taxation Redistribution 

JEL Classification

H26 H24 D7 D31 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Ackert, L. F., Martinez-Vazquez, J., & Rider, M. (2007). Social preferences and tax policy design: some experimental evidence. Economic Inquiry, 45(3), 487–501. CrossRefGoogle Scholar
  2. Ainsworth, M., & Filmer, D. (2002). Poverty, AIDS and children’s schooling: a targeting dilemma (Policy Research working paper No. 2885). The World Bank. Google Scholar
  3. 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. CrossRefGoogle Scholar
  4. 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. CrossRefGoogle Scholar
  5. Allingham, M. G., & Sandmo, A. (1972). Income tax evasion: a theoretical analysis. Journal of Public Economics, 1(3–4), 323–338. CrossRefGoogle Scholar
  6. Alm, J., & Gomez, J. L. (2008). Social capital and tax morale in Spain. Advances in Economic Analysis & Policy, 38(1), 73–87. Google Scholar
  7. 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. CrossRefGoogle Scholar
  8. Alm, J., McClelland, G. H., & Schulze, W. D. (1992). Why do people pay taxes? Journal of Public Economics, 48(1), 21–38. CrossRefGoogle Scholar
  9. 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. CrossRefGoogle Scholar
  10. 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
  11. Andreoni, J., Erard, B., & Feinstein, J. (1998). Tax compliance. Journal of Economic Literature, 36(2), 818–860. Google Scholar
  12. 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. Google Scholar
  13. Becker, G. S. (1968). Crime and punishment: an economic approach. Journal of Political Economy, 76(2), 169–217. CrossRefGoogle Scholar
  14. 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. CrossRefGoogle Scholar
  15. Corneo, G., & Gruener, H. P. (2002). Individual preferences for political redistribution. Journal of Public Economics, 83(1), 83–107. CrossRefGoogle Scholar
  16. 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. CrossRefGoogle Scholar
  17. Dell’Anno, R. (2009). Tax evasion, tax morale and policy maker’s effectiveness. The Journal of Socio-Economics, 38(6), 988–997. CrossRefGoogle Scholar
  18. 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. CrossRefGoogle Scholar
  19. 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. CrossRefGoogle Scholar
  20. 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. Accessed June 2010.
  21. Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition, and cooperation. The Quarterly Journal of Economics, 114(3), 817–868. CrossRefGoogle Scholar
  22. 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
  23. 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. CrossRefGoogle Scholar
  24. Fong, C. (2001). Social preferences, self-interest, and the demand for redistribution. Journal of Public Economics, 82(2), 225–246. CrossRefGoogle Scholar
  25. Frey, B. S., & Feld, L. P. (2002). Deterrence and morale in taxation (CESifo working paper No. 760). Google Scholar
  26. Frey, B. S., & Torgler, B. (2007). Tax morale and conditional cooperation. Journal of Comparative Economics, 35(1), 136–159. CrossRefGoogle Scholar
  27. Gueth, W., Schmittberger, R., & Schwarze, B. (1982). An experimental analysis of ultimatum bargaining. Journal of Economic Behavior & Organization, 3(4), 367–388. CrossRefGoogle Scholar
  28. Halla, M. (2010). Tax morale and compliance behavior: first evidence on a causal link (Johannes Kepler University of Linz working paper No. 1066). Google Scholar
  29. Heinemann, F. (2010). Economic crisis and morale. European Journal of Law and Economics, 1–15. Google Scholar
  30. Heinemann, F., & Hennighausen, T. (2010). Don’t tax me? Determinants of individuals towards progressive taxation (ZEW discussion paper No. 10-017). Google Scholar
  31. Heinemann, F., & Kocher, M. G. (2010). Tax compliance under tax regime changes (Munich discussion paper 2010-17). Google Scholar
  32. Hull, B. B. (2000). Religion still matters. Journal of Economics, 26(2), 35–48. Google Scholar
  33. Inglehart, R. (2000). Codebook for World values survey. Ann Arbor: Institute for Social Research. Google Scholar
  34. Inglehart, R. (2010). Values change the world. Resource document. Accessed April 2010.
  35. 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
  36. Konow, J. (2003). Which is the fairest one of all? A positive analysis of justice theories. Journal of Economic Literature, 41(4), 1188–1239. CrossRefGoogle Scholar
  37. Konrad, K. A., & Qari, S. (2009). The last refuge of a scoundrel? Patriotism and tax compliance (IZA discussion paper series No. 4121). Google Scholar
  38. Martinez-Vazquez, J., & Torgler, B. (2009). The evolution of tax morale in modern Spain. Journal of Economic Issues, 43(1), 1–28. CrossRefGoogle Scholar
  39. McKinnish, T. (2007). Welfare-induced migration at state borders: new evidence from micro-data. Journal of Public Economics, 91(3–4), 437–450. CrossRefGoogle Scholar
  40. Moulton, B. R. (1986). Random group effects and the precision of regression estimates. Journal of Econometrics, 32(3), 385–397. CrossRefGoogle Scholar
  41. OECD (2008). Growing unequal? Income distribution and poverty in OECD countries. Paris: Organisation for Economic Co-Operation and Development. Google Scholar
  42. 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
  43. Pommerehne, W. W., & Weck-Hannemann, H. (1996). Tax rates, tax administration and income tax evasion in Switzerland. Public Choice, 88(1–2), 161–170. CrossRefGoogle Scholar
  44. Richardson, G. (2006). Determinants of tax evasion: a cross-country investigation. Journal of International Accounting, Auditing and Taxation, 15(2), 150–169. CrossRefGoogle Scholar
  45. 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
  46. Slemrod, J. (2007). Cheating ourselves: the economics of tax evasion. Journal of Economic Perspectives, 21(1), 25–48. CrossRefGoogle Scholar
  47. 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
  48. Tittle, C. (1980). Sanctions and social deviance: the question of deterrence. New York: Praeger. Google Scholar
  49. 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. CrossRefGoogle Scholar
  50. Torgler, B. (2004). Tax morale in Asian countries. Journal of Asian Economics, 15(2), 237–266. CrossRefGoogle Scholar
  51. Torgler, B. (2005). Tax morale in Latin America. Public Choice, 122(1–2), 133–157. CrossRefGoogle Scholar
  52. Torgler, B. (2006). The importance of faith: tax morale and religiosity. Journal of Economic Behavior & Organization, 61(1), 81–109. CrossRefGoogle Scholar
  53. Torgler, B. (2007). Tax compliance and tax morale: a theoretical and empirical analysis. Cheltenham: Edward Elgar. Google Scholar
  54. 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. CrossRefGoogle Scholar
  55. 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
  56. World Bank (2010). The Word Development Indicators. Resource document. Accessed June 2010.
  57. Wu, S.-Y., & Teng, M.-J. (2005). Determinants of tax compliance. A cross-country analysis. Finanzarchiv, 61(3), 393–417. CrossRefGoogle Scholar
  58. Yitzhaki, S. (1974). A note on income tax evasion: a theoretical analysis. Journal of Public Economics, 3(2), 201–202. CrossRefGoogle Scholar
  59. Young, M., Reksulak, M., & Shughart II, W. F. (2001). The political economy of the IRS. Economics and Politics, 13(2), 201–220. CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Cologne Graduate School in Management, Economics and Social Sciences (CGS)University of CologneCologneGermany
  2. 2.Institute for the Study of Labor (IZA)BonnGermany
  3. 3.ISERColchesterUK
  4. 4.CESifoMunichGermany

Personalised recommendations