Pampel Andrighetto and Sven Steinmo | How Institutions and Attitudes Shape tax Compliance: a Cross-National Experiment and Survey
Tax evasion is a problem everywhere, but it is a much bigger policy problem in some countries than it is in others. The Italian government estimates that it loses more than 27 percent of total tax revenue to evasion, whereas the Swedish government estimates their “tax gap” to be less than 9 percent. What ex-
plains this variation? We test for the importance of culturally based attitudes and institutionally structured rules for taxes and benefits through a unique set of cross-national experiments and attitudinal surveys done in multiple locations across Italy, the UK, the United States, and Sweden. Participants in each location were presented with
identical conditions based on institutional variations (tax rates, redistribution regimes, benefits) and asked to complete a survey afterward concerning their attitudes toward a number of social and political issues. A mixed-model analysis of the 2,537 subjects in our study reveals consistent influence of institutional scenarios and three attitude scales measuring pro-redistributive ideology, fiscal responsibility, and perceived government competence. Country effects, however, are more mixed and inconsistent.
Do liberals and conservatives who trust the government have more similar preferences regarding the federal budget than liberals and conservatives who do not? Prior research has shown that the ideological gap over spending increases and tax cuts narrows at high levels of trust in government. We extend this litera- ture by examining whether the dampening effect of trust operates when more difficult budgetary decisions (spending cuts and tax increases) have to be made. Although related, a tax increase demands greater material and ideological sacrifice from individuals than tax cuts. The same logic can be applied to support for spending cuts. We test the trust-as-heuristic hypothesis using measures of revealed budgetary preferences from a pop- ulation-based survey containing an embedded budget simulation. Our findings show that trusting liberals and conservatives share similar preferences toward spending cuts and tax increases, adding an important empiri- cal addendum to a theory based on sacrificial costs.