Shaming Tax Delinquents

Ricardo Perez-Truglia; Ugo Troiano

doi:10.3386/w21264

Shaming Tax Delinquents

Ricardo Perez-Truglia & Ugo Troiano

Working Paper 21264

DOI 10.3386/w21264

Issue Date June 2015

Revision Date August 2018

Many federal and local governments rely on shaming penalties to achieve policy goals, but little is known about how shaming works. Such penalties may be ineffective, or even backfire by crowding out intrinsic motivation. In this paper, we study shaming in the context of the collection of tax delinquencies. We sent letters to 34,334 tax delinquents who owed a total of half a billion dollars in three U.S. states. We randomized some of the information contained in the letter to vary the salience of financial penalties, shaming penalties, and peer comparisons. We then measured the effects of this information on subsequent payment rates, and found that increasing the visibility of delinquency status increases compliance by individuals who have debts below $2,500, but has no significant effect on individuals with larger debt amounts. Financial reminders have a positive effect on payment rates independent of the size of the debt, while information about the delinquency of neighbors has no effect on payment rates.

We thank the MITRE Anonymous Donor for financial support, Mary Mangum, Sam Russell and the Office of the General Counsel at the University of Michigan for invaluable support for the field experiment. Special thanks to Manisha Padi and Joel Slemrod for very useful feedback in the early stage of the project and for detailed comments. We also thank feedback from Nageeb Ali, David Autor, Charlie Brown, Raj Chetty, Magali Delmas, Mihir Desai, Leopoldo Ferguson, Mary L. Gray, Jonathan Gruber, Jim Hines, Caroline Hoxby, Wojciech Kopczuk, Greg Lewis, Day Manoli, Ben Marx, Nolan Miller, Markus Mobius, J.J. Prescott, Matthew Rabin, Justin Rao, David Rothschild, Jeff Smith, Alan Viard, Duncan Watts, Matthew Weinzierl, Glen Weyl and seminar participants at Harvard Business School, UCLA Anderson, Columbia University, University of California San Diego, Boston University, Barcelona IPEG, Microsoft Research New England, Microsoft Research New York, University of Michigan, Universidad Nacional de Los Andes, University of Illinois at Urbana-Champaign, Society for Economic Dynamics Annual Meeting, ASSA Annual Meeting, RIDGE Workshop on Political Economy and the NBER Summer Institute. This project was reviewed in advance and declared exempted from IRB oversight at the University of Michigan. We thank Will Boning, Kamala Kanneganti and Felipe Montano Campos for outstanding research assistance. A previous version of the paper circulated under the title “Tax Debt Enforcement.” The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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