Communicating Tax Penalties to Delinquent Taxpayers: Evidence from a Field Experiment

We analyze a large field experiment conducted with the Colorado Department of Revenue to study the presentation of financial incentives and social norms in tax delinquency notices. We find that notices that highlight and provide information about financial penalties modestly raise the payment rate among delinquent taxpayers, with larger effects for notices providing greater detail. In contrast, we find no payment effect from highlighting social norms for timely payment. Our results suggest that attention to seemingly minor decisions about the wording of notices sent by tax authorities can increase tax payments and reduce administrative costs associated with taxpayer delinquency.