Soled & Ventry: Using Shame to Close the Tax Gap

A Little Shame Might Just Deter Tax Cheaters (USA Today), by Jay A. Soled (Rutgers Business School) & Dennis J. Ventry, Jr. (American):

Eliot Spitzer isn't the only john being shamed these days. Around the country, campaigns such as "Johns TV" launched by Denver are fighting the demand side of prostitution with public humiliation. ...

Tax officials should take notice. If shaming can curb the human desire that underwrites the oldest profession, it can surely curb tax evasion. In fact, researchers have shown that tax penalties relying on social punishment rather than economic or legal sanction can be effective in improving tax compliance. Shaming deters tax evasion by expressing society's condemnation of cheating, and by displaying the cheater's bad acts for all to see. People undoubtedly comply with laws for various reasons, but fear of detection provides the strongest compliance incentive. ...

In the end, illicit sex and tax cheating are more alike than one would think. Neither is a victimless crime. Prostitution exploits women, exposes them to physical and emotional danger, and poses health hazards not only for prostitutes and johns but also for their families. Tax evasion, for its part, victimizes the hundreds of millions of Americans who annually pay their taxes in full and on time, contributes to the exploding budget deficit, and restricts the government's ability to raise necessary revenue.

For shame.

See also this week's post on What's Wrong With Shaming Corporate Tax Abuse.