March 26, 2015

Despite TurboTax's best efforts, the process of paying government hasn't changed much since the days of Sherwood Forest: someone comes to take away some of your hard earned money, and you're not exactly sure where it all goes.

Now, a relatively low-tech approach could be the way to make us all like paying our taxes a little more.

To get that answer, says Michael Norton of Harvard Business School, we have to look more closely at why we really hate taxes.

"Some of it is just [that] it's people taking your money away, and we don't like that. But we really focus on is this idea that: They're taking your money away and you don't know what it's being used for."

Norton, working with Cait Poynor Lamberton of the University of Pittsburgh and Jan-Emmanuel De Neve of University College London, designed two experiments that found that allowing taxpayers to have a say in where their money goes actually helps to improve tax compliance.

"We thought maybe if we let people feel like they had a voice in where their taxes went – that they could choose a little bit where they were going to go – maybe they wouldn't hate it so much," explains Norton. "Some people really like to support the military, and other people don't. If you were allowed to decide at least where some of your tax money went, it would really change your feeling about whether that was good."

What's more, Norton discovered that results were similar whether taxpayers had control of only 10 percent of their tax dollars, or 100 percent. "We're just excited that anybody is letting us say anything about where our taxes go," adds Norton.

The researchers found that test subjects were less likely to exploit a questionable loophole in their taxes when given more agency in where the money was going.

It isn't all good news, though: in a separate experiment, Norton discovered that people who know their money is going to taxes are much less productive.

"We have people working on a boring thing. They work away, and then we stop them and say, 'Hey, surprise, in the next part of this, we're cutting their wages in half.' They're not happy. It turns out they work a little bit less. But other people we say, 'Hey, we're cutting your wages in half, and it's a tax that we're collecting.' Those people stop working entirely."

Maybe not the most motivational news for all you late filers out there — but hey, you might have a little more power soon.

IRS, Culture, Michael Norton, Income taxes, Kara Miller

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