May 23, 2019

Why Americans Are So Good at Paying Taxes

“If such a thing as American exceptionalism remains, maybe it can be found in this: Despite deep IRS budget cuts, an average audit rate that has plunged in recent years to just 0.6 percent, and a president who has bragged that dodging federal taxes is “smart,” most Americans still pay their income taxes every year. Even more remarkable, most of us feel obliged to pay. To quote the findings of a 2017 IRS survey: “The majority of Americans (88%) say it is not at all acceptable to cheat on taxes; this ethical attitude is not changing over time.”

True, tax crooks might not confess their real feelings in an IRS survey. But other data confirm that the U.S. is among the world’s leaders when it comes to what economists call the voluntary compliance rate (VCR). In recent decades, America’s VCR has consistently hovered between 81 and 84 percent. Most countries don’t calculate their VCR regularly, but when they do, they lag behind the U.S. One paper that gathered what comparative data were available reported that Germany, the top European Union economy, had a VCR of 68 percent.

Other countries score worse, among them Italy (62 percent), the site of a sprawling tax scandal in which about 1,000 citizens were charged last year with bilking the government out of 2.3 billion euros in tax revenue. The public didn’t seem terribly bothered; ex–Prime Minister Silvio Berlusconi, who was convicted of tax fraud in 2013, may have tapped a common sentiment when he said back then that “evasion of high taxes is a God-given right.””

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