Paul L. Caron

Tuesday, June 16, 2009

Morse: Using Salience and Influence to Narrow the Tax Gap

Susan Cleary Morse (Santa Clara) has published Using Salience and Influence to Narrow the Tax Gap, 40 Loy. U. Chi. L.J. 483 (2009).  Here is the abstract:

Most self-employed and small business taxpayers cheat on their taxes. In fact, in the aggregate, they fail to pay about half the tax they owe to the government, and this unpaid tax amounts to about $150 billion annually. This amount is about half the "tax gap," or the amount of tax due that the federal government does not collect.

This paper argues that more salient government communications and greater attention to principles of influence would improve existing and proposed policies to encourage self-employed and small business taxpayers to pay their taxes. Reversing the widespread tax evasion among self-employed and small business taxpayers requires changing the existing social norm of noncompliance, which in turn demands a better connection between the government's message and the experience of taxpayers. Policymakers should recraft their anti-tax-gap messages so that they grab the attention of the target audience and take advantage of established influence tools to leverage predictable taxpayer heuristics such as availability bias and following the compliance behavior of similar peers.

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I take exception to Ms. Morse's categorization of most self-employed taxpayers as tax cheats.

First, I don't know where she gets her statistics from, but I don't believe more than 50% of the self-employed tax returns that are filed are substantially inaccurate.

Second, the mere fact that someone's tax return is inaccurate is not enough to justify the label "tax cheat."

If it were, then Tim Geithner is a tax cheat and should never have been confirmed as Secretary of the Treasury.

Surely, Ms. Morse can distinguish between an honest mistake and an intentional underpayment of tax.

Posted by: peter | Jun 17, 2009 5:55:00 AM