Tax Debt Enforcement: Theory and Evidence from a Field Experiment in the United States

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. We found that increasing the visibility of delinquency status increased compliance by individuals who have debts below $2500, but had no significant effect on individuals with larger debt amounts. Financial reminders had a positive effect on payment rates independent of the size of the debt, while information about the delinquency of neighbors had no effect on payment rates.