This Psychological Trick Will Make You Love Paying Your Taxes | Michael Norton

Half the pain of paying taxes is having no control over where it goes. This Harvard professor has a great idea to give people more of a voice… and it involves just a very slight change in something as boring as a parking ticket.


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Michael Norton: When we started studying people paying their taxes we were kind of looking for a real pain point that people have. If you think about what’s the worst day of the year for you, often the worst day of the year is when you have to write that extra check to the IRS. And of course partly we hate it just because we have to give money away that we wish we could keep, but we thought there might be some other underlying psychology going on for why we hate paying taxes so much.

And if you think about it when you send that check off you kind of have no idea what happens with it. I mean you know it’s going to your state or federal government, but you don’t really know what it’s being used for. You look outside and you see roads and there’s some link between those in some way or another but you don’t really know exactly what’s happening.

And that decoupling between what you’re sending in and what the output is is actually pretty aversive for us, we kind of like to know when we do something what’s going to happen as a result.

And so what we try to do in our research is recouple those two things closer together. So imagine, for example, when you pay your taxes you write in the amount and then you can allocate where you want things to go. You could actually say I want more of my taxes to go to schools versus roads versus the military or the reverse if you wanted to support the military more. And the idea there was sure we still wouldn’t like paying taxes that much because we wish we could spend our money on ourselves, but recoupling the cost and the benefits might actually help us hate it a little bit less.

We’ve talked to a lot of governments, local governments, state governments, federal governments in the U.S. and around the world about implementing this idea of recoupling tax payments with the benefits that citizens get. Politically it’s quite difficult, so you can imagine that if you talk about letting citizens allocate all of their money wherever they want you might not get funding for really basic things like infrastructure that aren’t really that exciting for people to think about.

So politically there’s a real risk to kind of opening up democracy where instead of taxes going into a pool where elected officials decide what needs to be done, each individual citizen has a voice. One way we’ve tried to deal with that is to think about maybe you don’t need to allocate 100 percent of your taxes wherever you want, but what if I said at the end of the year you know what, you’re going to get to allocate ten percent wherever you want. So most of your taxes are still going to be the old way where they go into a general pool and then the people we’ve elected who we in theory trust will decide where the money goes, but we still as citizens get to say a little bit more about what we want to do. And some cities in the United States have started doing this through something called participatory budgeting.

And the idea there is that a city can take some tax money, it could be a small amount, it could be a large amount, the city of Cambridge where I live has done this, and let citizens vote for where that money should go. So they’re not getting access to all of the tax revenue for the entire city, but the city is saying we want to set aside some money where citizens can actually tell us where it should go and we will follow through and make sure the money goes there. And again, that helps citizens see that, it’s called participatory budgeting, they’re actually participating and getting to make specific decisions about what happens with their taxes.

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