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States Use Behavioral Science to Increase Compliance


All forms of government need revenue to function, be they monarchies, dictatorships, or democracies. Methods of collecting necessary funds have varied widely over time, depending on the government in question: sometimes money is taken by force, sometimes it is freely given. A handful of states are using behavioral science to help increase tax compliance.

Taxes are paid because they have to be paid, and because we fear the consequences of not paying them. According to Ted London, vice president of CGI's Tax, Revenue and Collections Center of Excellence, one of the jobs of a tax administrator is "to get people to change their behavior" with respect to tax compliance. He reminds that "[p]eople do not always respond rationally when faced with choices." To that end, tax administrators need to choose their words carefully.

In a presentation during a 2012 state tax conference in New Hampshire, Mr. London suggested that states do the following to encourage tax compliance:

  • Use easy to understand language;
  • Point out the negative consequences of non-compliance;
  • Let it be known if most people comply;
  • Think carefully about word choices.

Studies have shown (presentation, p. 10) that people are more likely to comply if they believe most of the people near them comply. Compliance also increases if people fully  understand the negative cost of non-compliance.

The California State Board of Equalization has been looking at "using behavior science to increase revenue and compliance." Yet California isn't the first state to apply behavioral science to tax collection.

In 2005, Governor Chris Gregoire of Washington State issued an executive order requiring government agencies to use Plain Talk when communicating with the people:

"[W]e recognize that clear, easy-to-understand communications are essential to good service. We communicate with businesses and individuals through letters, forms, instructions, announcements, publications and other documents… . They must be written and designed so that they can be easily understood."

According to Executive Order 05-03, Plain Talk programs have increased compliance and reduced complaints. Maybe how things are worded does have an impact, after all.

Worried about sales tax compliance? You don't have to.

photo credit: wallyg via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.