Does Shaming Work? Tax Enforcement Edition

There is a lot of public conversation about the appropriate use of shaming in civil society. Where the law fails to punish offenders, advocates say, shaming can be productive for punishment and future deterrence. Detractors worry that unregulated mob justice is not justice at all and that it has a quieting effect on genuine civil discourse where honest disagreement can occur. When shame is appropriate and how to generate good social norms is an ongoing question.

Shaming is also a public policy tool wielded by the government for purposes like encouraging energy conservation and extending the punishment of sex offenders. In tax policy, governments of every level around the world have experimented with the use of shaming to encourage enforcing tax payments. One difficulty with shaming is trying to distinguish it from other salience effects (i.e. reminding people they could be audited or are delinquent) that is unique from shaming. An excellent piece of research on the role of shaming in tax enforcement comes from Ricardo Perez-Truglia and Ugo Troiano (NBER, August 2018). Here is the abstract:

Many federal and local governments rely on shaming penalties to achieve policy goals, but little is known about how shaming works. Such penalties may be ineffective, or even backfire by crowding out intrinsic motivation. In this paper, we study shaming in the context of the collection of tax delinquencies. We sent letters to 34,334 tax delinquents who owed a total of half a billion dollars in three U.S. states. We randomized some of the information contained in the letter to vary the salience of financial penalties, shaming penalties, and peer comparisons. We then measured the effects of this information on subsequent payment rates, and found that increasing the visibility of delinquency status increases compliance by individuals who have debts below $2,500, but has no significant effect on individuals with larger debt amounts. Financial reminders have a positive effect on payment rates independent of the size of the debt, while information about the delinquency of neighbors has no effect on payment rates.

A bit more specifically, the researchers randomly sorted subjects into two treatment groups, group one represented zip codes from which one person would be selected, while in group two the researchers would also select additional areas from the same area to inform them about an online list of delinquents. Within these groups they randomize the salience of other information, in addition to notice that their “neighbors” were able to find them on the shaming list. The first treatment group ferreted out the salience or notice of being watched by the government, while the second added a peer component for the prospect of social pressure.

There is a lot of cross-randomization in this, so there is a rich array of findings, including some that allow them to arguably distinguish whether it was peer pressure via shaming or whether it allowed them to acclimate and contextualize their tax debt in a social context.  In the end, as the abstract says, the shaming seems to have worked for lower tax debts. Pages 5 and 6 walk neatly through the results with interpretation and qualifications.

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