A proposal to boost tax compliance through a lottery. The prize: A refund on all your taxes.

Ideas for using of lotteries to incentivize behavior are ever-expanding. In the Harvard Business Review, Steve Martin and Paul Dolan propose a lottery as a way to improve tax compliance.

Every citizen who submits their tax return and payment honestly and on time has their social security number entered in a lottery with a number (to be determined) of citizens winning a prize. What might that prize be?

How about a letter from the IRS with a check:

“Dear Taxpayer, Congratulations! You’ve won your money back.”

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  • http://twitter.com/Moktarama Moktarama

    Don’t you think a simple refund would not be enough of an incentive for the people not paying their taxes ? To make a real difference, don’t the numbers need to be very high (given the very large number of taxpayers and the non-willing to pay for some seeming not very different from a gamble i.e. “If I don’t pay, I have only a very slim chance to get caught, thus a simple return wouldn’t be enough of a temptation given the numbers” ) ?

    The other “nudge” could be to increase the numbers of inspectors (as in the trope “more police equal less crimes” ) , then publicize the non-payment of taxes.

    Now, we need some US states to try those, and give some data to infirm or confirm the hypothesis ;-)

    • CDaggett

      Not directly related, but there was a good article this week in the Boston Globe about “testing” legislation such as tax policy: http://www.boston.com/bostonglobe/ideas/articles/2010/12/12/law_lab/

      • http://twitter.com/Moktarama Moktarama

        Thx… I’m not sure though that hard science applied to social science could give good results unless the sample is huge.

  • Jim Tobias

    This concept should be applied to the tax rates of the extremely wealthy, all of them, with winners getting, say, a 10% rate and losers getting 50%. The TV show based on stories of gloating and conspicuous consumption on the one hand, and whining and faux-economizing on the other would earn enough additional income to balance the budget.