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

Taylor Cranor, Jacob Goldin, Tatiana Homonoff, and Lindsay Moore
National Tax Journal, Revise and resubmit at National Tax Journal

Tax authorities must make many decisions about how to present payment incentives to
taxpayers. We analyze a large field experiment conducted in partnership with the Colorado
Department of Revenue to study the effect of varying the presentation of financial and non-
financial incentives in tax delinquency notices. We find that making salient the specifics of
a financial penalty for nonpayment can modestly raise the payment rate among delinquent
taxpayers. We find suggestive evidence that describing the existence of a penalty (but not its
details) can also raise payments, but to a lesser degree. In contrast, emphasizing social norms
for timely payment yields a point estimate that is near zero and statistically insignificant. The
effects we observe are concentrated among taxpayers with low balances due. Our results suggest
that attention to seemingly minor decisions about the wording of notices sent by tax authorities
can reduce administrative costs associated with taxpayer delinquency.

Wagner Faculty