Most Americans comply with the tax laws, but every year many of our fellow citizens don't. The result is the “tax gap” — the amount of revenue that the government loses because people are cheating. In one recent year, for example, the tax gap was $450 billion. That’s a lot of money — more than 10 times the budget of the State Department.
What can be done to increase compliance? Remarkably, a short letter to delinquent taxpayers — based on the findings of behavioral science — can have large effects. And the central lesson is simple: When tax delinquents are told that most people pay their taxes on time, they are far more likely to pay up. It’s a nudge that can really work. [Bloomberg View]
