Monday, October 14, 2013

Tax Ingenuity to Make Levies Less Painful

With political battles in full rage about the U.S. federal budget, I’m stepping toward the middle of the ruckus, arms outstretched, palms and fingers facing straight up, rotating myself around, announcing in a loud voice, “I can tell you would make people happier to pay taxes.”
     If anybody accepts the bait, I’ll say that behavioral scientists at Harvard University and University of British Columbia suggest structuring the levies so they seem more like charitable contributions. Show taxpayers how their money is being used to help others and give taxpayers more of a say in how their money is being spent.
     The second part of that is a challenge in a representative democracy. We elect our legislators to set budgets. Most of us don’t do it in town meetings. But the first part would require less ingenuity. The challenge is in influencing whom the taxpayers would derive happiness from assisting. Toward meeting this challenge, other study findings have suggested, portray recipients of program benefits as individuals and cohesive groups.
     Researchers at University of Michigan and London Business School analyzed funding activity on, a micro-financing site. On the site, photos and descriptions are presented of people seeking small loans for commercial endeavors. The researchers were interested in what happened with listings which included photos of a group of fund seekers. Some of these photos were judged in a preliminary study to show a group who looked tightly organized, as if ready to act as one.
     Those appeals were more quickly funded than the appeals in which the group looked loosely organized.
     The Michigan/London researchers also found that charitable donations to help poor children were higher when the children were described as belonging to the same family than when not.
     The pull is stronger if a consumer is shown a single attractive entity than if shown isolated individuals.
     The effectiveness of this technique does depend on the consumers’ culture. The Harvard/British Columbia researchers explored another aspect of taxation: Some citizens’ resistances to what they consider as a redistribution of wealth which destroys individual initiative. Studies find that people in countries with high taxation to fund generous public benefits tend to be happier than people in countries where that is less so. Citizens in Sweden and Japan are, on average, happier than citizens in Italy and Singapore.
     Selling the idea of taxation to a culture may require cultivating a broad spirit of generosity.

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