Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending

Do perceptions about how the government spends tax dollars affect the willingness to pay taxes? We designed a field experiment to test this hypothesis in a natural, high-stakes context and via revealed preferences. We measure how taxpayers perceive the government is using their tax dollars, such as the percentage of their property taxes that fund public schools. We find that, even though accurate information is available, taxpayers still have substantial misperceptions. We used an information provision experiment to induce exogenous shocks to these perceptions. Using administrative data on property tax appeals, we measure the causal effect of perceived government spending on the willingness to pay taxes. We find that perceptions about government spending have a significant effect on the probability of filing a tax appeal and in a manner that is consistent with a reciprocal motivation: individuals are more willing to pay taxes if they believe that the government services funded by those taxes will be of greater personal benefit to them. We discuss implications for the study of tax morale.