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This chapter examines how public attitudes and judgments about tax fairness reflect distributive justice rules about proportionality/contributions, needs, and equality; fairness issues that influence voluntary tax compliance (Hofmann, Hoelzl, & Kirchler, 2008; Spicer & Lundstedt, 1976). Most public polls and some prior research indicate the general public considers progressive income tax rates as fairer than flat tax rates, a reflection of the Needs rule of distributive justice theory; our 1,138 participants respond similarly. However, two-thirds of our politically representative sample of the American public actually assign “fair shares” of income taxes consistently with fairness-as-proportionality above an exempt amount of income, consistent with the Contributions rule of Equity Theory. We argue experimental assignments of fair shares of income taxes can best be understood as a combination of the Needs rule, applied by exempting incomes below the poverty line from income taxation (via current standard deductions) and taxing incomes above this exempt amount at a single tax rate (i.e., a flat-rate tax) consistent with the Proportionality/Contributions rule. Viewed in combination, these two distributive justice rules explain the tax fairness judgments of 89% of our sample and indicate surprising general agreement about what constitutes a fair share of income taxes that should be paid by US citizens from the 5th percentile to the 95th percentile of the income distribution. The joint application of these fairness rules indicates how seemingly competing, partisan distributive justice concerns can inform our understanding of social attitudes about tax fairness across income classes.

The cost of compliance is an essential variable to consider when administering a tax system. One recent study estimates that the yearly federal tax compliance burden in the US exceeds $431 billion dollars, and this cost does not include the potential greatest cost of all – changes in taxpayer behavior that reduces economic efficiency (Laffer, Winegarden, & Childs, 2011). One example of such behavior is the renunciation of US citizenship due to the impact of the Foreign Account Tax Compliance Act (FATCA) reporting requirements. Using this context, our study examines how FATCA compliance costs can affect taxpayer behavior in a manner that reduces economic efficiency. We collected responses from 197 experienced US taxpayers living in the US. Our study finds that when tax compliance costs are high, taxpayers may be more likely to renounce their citizenship to avoid FATCA reporting requirements. We further learn that tax compliance costs may increase the likelihood of citizenship renunciation even in the presence of a minimal US tax burden. Supplemental mediation analysis demonstrates that one's perceived fairness of compliance does not mediate the effect of high compliance costs on a taxpayer's renunciation decision; however, one's perceived fairness of compliance and fear of sanctions, collectively, partially explain the effect of tax burden on the renunciation decision. In addition, we find that ethics, the perceived probability of detection, and average income level affect the decision to renounce citizenship. Our findings suggest broader impacts of tax policy and provide a foundation for future research to further explore domestic and foreign tax compliance behaviors.

In this study, we examine the role of temporal framing in the context of tax audit risk. Using construal-level theory, we propose that compared with an every-year frame (e.g., 1.5 million returns are audited every year), framing audit risk in an everyday frame (e.g., 4,000 returns are audited every day) will make audit risk seem more likely and thus increase taxpayer compliance. We test whether perceived fairness of the tax system, an individual difference variable related to tax compliance, moderates the effect of temporal framing on behavioral intentions. The results show that communicating risk in a day frame rather than a year frame increases compliance for taxpayers who perceive the tax system as unfair but not for taxpayers who perceive the tax system as fair. Increasing compliance among taxpayers who perceive the tax system as unfair is crucial, as they are less likely to be compliant. Thus, framing audit risk can assist in increasing taxpayer compliance.

Generational theory research suggests that the arrival of the Millennial generation into adulthood will have significant effects on society because of their differing values and attitudes. We examine whether this generation has differing perceptions of tax fairness as well as their attitudes towards tax compliance as compared to other generations by administering an instrument to a sample of 303 taxpayers, distributed approximately equally across three generational groups: Baby Boomers, Generation X, and Millennials. The results suggest that there are significant differences in the viewpoints toward vertical equity and progressive taxation among the three generations. More specifically, the Millennial generation was less likely to recommend progressive taxation than the other two generations. In addition, there were significant differences between the groups on an exchange equity question as well. However, in this situation, it was the Baby Boomers that were significantly different from the other two generations. The results also suggest that the Millennials have attitudes that are more accepting of noncompliance than both the Generation X participants and the Baby Boomer participants. However, a significant difference does not exist between the Baby Boomer participants and Generation X participants on their attitudes towards compliance.

This study examines the impacts of three individual values on the willingness to pay and perceived fairness of use tax on Internet purchases. Analysis of survey data collected from 114 taxpayers reveals that while a strong sense of national identity is significantly correlated with fairness perceptions of use tax, it is not significantly related to perception of willingness to pay use tax. Our findings suggest that taxpayers with a high level of religiosity are more willing to pay use tax, although they do not perceive the use tax to be fair.

The purpose of this study was to identify how individuals form fairness judgments about a tax system and what factors they attend to when comparing the fairness of a flat tax system with the current tax system. Based on equity theory and prior tax research the complexity of the tax system, the policy objectives achieved by the tax system and the financial effect of the tax system were hypothesized to influence individuals' fairness judgments. Further, the function served by an individual's attitude toward the tax system was expected to further explain when, self-interest would be particularly salient.The study's hypotheses were tested using the responses to a questionnaire sent to a cross-section of U.S. citizens. The study participants compared the current federal tax system with a flat tax system that differed from the current system on three dimensions. The alternative system was less complex than the current tax system, it achieved different policy objectives than the current system and the personal tax liability of the participants differed between the two systems. Regression analysis was used to assess the relative influences on the respondents' fairness judgments. Respondents' comparative fairness judgments were influenced by their judgments regarding economic goals achieved by each tax system, unjustified complexity, and, especially, self-interest.

This paper investigates how individuals determine their tax morale levels and tax compliance decisions. Using a questionnaire survey and a multivariate tests procedure, the paper revealed that tax evasion is morally acceptable in Jordan under some circumstances, indeed there could be an affirmative duty to evade taxes since the government is perceived to be highly corrupted. The findings also show that while the extent of the governmental corruption has a positive (negative) effect on tax non-compliance (tax morale), the efficient expenditure of governmental tax revenues has a negative (positive) impact on tax non-compliance (tax morale). The individuals’ tax non-compliance decisions are likewise positively affected by the tax rates and by the taxation system’s being perceived as unjust, but decline with the increase of audit rates and the subsequent penalty rates. The degree and effectiveness of these determinants are dependent on the individual’s level of risk aversion, financial constraints and the surrounding referent groups. The results also confirm that individual factors play a significant role in determining the level of tax morale. Overall, the tax morale level and the compliance decision of an individual are greatly influenced by gender, age, educational level, occupational status and religious background.

Most governments around the world rely heavily on tax revenue to fund not only their recurrent expenditure but also their long-term development goals. There is some evidence suggesting that tax evasion in Vietnam has, over the years, been on the rise in terms of number, scale and degree of sophistication. It may thus be beneficial to understand the extent to which various relevant psychological factors interact to influence the tax compliance of Vietnamese taxpayers. This chapter attempts to quantify the effects of taxpayer's emotion, trust and perception on their tax compliance in Vietnam. It adopts a positivist research framework, a quantitative research method and primary data collection. First, a simple, theoretical model in which emotion and trust affect tax compliance both directly and indirectly through perception as a mediating variable, is constructed. The Baron−Kenny method is then applied to the data collected from an e-survey to test various hypotheses derived from the devised theoretical model. The results show that taxpayer's perception positively and significantly influences tax compliance whereas emotion and trust exert significant and positive effects on tax compliance both directly and indirectly (via perception). The findings suggest that voluntary tax compliance in Vietnam can be improved through better tax administration services, more fiscal policy accountability and pro-active tax socialization.

We conduct an experiment asking participants to choose to purchase either a traditional or hybrid car to examine how federal-state conformity of tax incentives impacts the decisions of taxpayers. We also examine perceptions of taxpayers surrounding federal-state conformity. Consistent with theory related to the effects of information environment and using an experiment in which taxpayers are asked to evaluate tax incentives related to a purchase decision between a traditional and hybrid car, we find that conformity is a significant factor in increasing the propensity to take advantage of the tax incentive. Specifically, we find that participants with simple and conforming federal-state incentives are more likely to take advantage of the tax incentive than with complex and conforming federal-state incentives. In addition, the effects of conformity between federal and state incentives suggest that participant perceptions of the federal system were heavily influenced by the actions of the state.

This study investigates taxpayers' assessments of what they believe to be fair amounts of federal income taxes for families that differ with regard to the number of dependent children, the number of spouses employed, and marital status. Three-hundred-and-sixty-six prospective jurors from Alabama and Colorado participated in the experiment. In a between-subjects design, tax liabilities were: (1) lower when households included dependent children, (2) the same regardless of whether one or both spouses generated the income, and (3) the same for married couples and singles with the same total incomes. Participants did not assess taxes so as to avoid a marriage penalty; instead, they assessed taxes in a manner that avoided a single's penalty, even though approximately three-fourths of the participants were married. Further, contrary to current tax policy, within-subject results suggest that participants consider it fair for a single parent to pay significantly less tax than a married couple with a child.