Taxes Make People Care

Citizens are more eager to stamp out corruption when their own money is on the line.

In June 2012, a crowd of local workers sang as they walked through the streets of Lira, Uganda’s fourth-largest city, with bags of garbage slung over their shoulders. Upset that the government hadn't been coordinating garbage pickups—a service they thought their taxes should be covering—the workers deposited the bags of trash outside government buildings, where they rotted in the summer sun. Before they could make good on their further threat of taking trash to local politicians’ houses, garbage collection started again.

This sort of political agitation is actually quite rare in Uganda. Corruption is relatively common among Ugandan political officials, yet most of the populace can’t be bothered to care about it, to their detriment. Lucy Martin, a political-science Ph.D. candidate at Yale, recently wrote a working paper that attempts to explain why more Ugandans aren’t protesting like those in Lira: It might be because they often aren’t asked to pay taxes.

Martin hypothesized that when politicians mismanage public funds, citizens might be more concerned if their own money—not natural-resource revenues or foreign aid—is on the line. To explain this, she invokes the concept of loss aversion, which says that people are more attuned to losses than gains. People categorize taxes as losses, and Martin argues that this categorization causes them to care more about how politicians are using their money than they otherwise would. (To be clear, Martin isn’t arguing that taxpayers should shoulder all financial burdens, but that contributing something could make them less apathetic.)

Martin’s argument was backed up in a series of experiments run in Kampala, Uganda’s capital. In these tests, subjects labeled “citizens” were given the option to pay to punish those labeled “leaders,” who had distributed public funds unfairly. In one scenario, the citizens were given, say, $10, and then required to pay $5 to their leaders, who ended up with $10 in funds. In another scenario, the citizens were simply given $5, and the leader was given $10. People in the first scenario were 12 percent more willing to pay to punish the leader than people in the second one, even though both decisions involved identical amounts of money. In qualitative follow-up surveys, participants talked about the importance of recovering the taxes they paid.

The results of some rudimentary financial games in Uganda might not be enough to form a unified theory of apathy, but this finding probably contains more than just a grain of truth. Even though the average age of the experiments’ subjects was 22.6 years, that’s not particularly unrepresentative of Uganda, where 70 percent of the population is under the age of 25. And the loss-averse feelings that kick in when someone pays taxes are strong enough to be generalizable, even if willingness to punish inequitable behavior varies across cultures. (A 2006 study tracking these differences, for example, found that rural Missourians were more vindictive than the Tsimane people of lower Bolivia.)

To an extent, the fact that about 86 percent of Americans paid federal or payroll taxes in 2013 can explain why Americans are quick to anger when a public official wastes their money (whether they do anything beyond getting angry, of course, is a separate issue). Taxes might also have an effect on voter turnout, too: A study published last month in the American Journal of Political Science argues that wealthier citizens are more likely to vote when their government can tax them.

h/t Chris Blattman