Where Do My Tax Dollars Go? Tax Morale Effects of Perceived Government Spending

Do perceptions about government spending affect willingness to pay taxes?

Do perceptions about government spending affect willingness to pay taxes? We test this hypothesis with a natural field experiment that focuses on the allocation of property taxes to public schools. Our results show that taxpayers often misperceive the destination of their tax dollars. By introducing shocks to households' perceptions via an information-provision experiment, we find that perceptions of how tax dollars are used significantly affect the probability of filing a tax appeal. Moreover, the effects are consistent with reciprocal motivations: individuals are more willing to pay taxes if they believe that the government services funded by those taxes will provide greater personal benefit. (JEL C93, D12, H26, H71, H72, H75)