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Happiness and tax morale: An empirical analysis

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  • Lubian, Diego
  • Zarri, Luca

Abstract

This paper presents empirical evidence that “tax morale” – taxpayers’ intrinsic motivation to pay taxes – constitutes a new determinant of happiness, even after controlling for several demographic and socioeconomic factors. Using data on Italian households for 2004, we assess the strength of tax morale by relying on single items as well as composite multi-item indices. Our main result that fiscal honesty generates a higher hedonic payoff than cheating is in line with Harbaugh et al. (2007)’s neuroeconomic finding. Further, it sheds light on the well-known “puzzle of compliance”, that is the fact that many individuals pay taxes even when expected penalty and audit probability are extremely low: tax compliance is less puzzling once we show that not only it is materially costly, but also provides sizeable non-pecuniary benefits that make it rewarding in itself.

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  • Lubian, Diego & Zarri, Luca, 2011. "Happiness and tax morale: An empirical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 223-243.
    • Handle: RePEc:eee:jeborg:v:80:y:2011:i:1:p:223-243
    DOI: 10.1016/j.jebo.2011.03.009
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    More about this item

    Keywords

    Happiness; Tax morale; Tax compliance;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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