Economics, Politics, Psychology, Society

Status Rewards for Paying Taxes

As I have written elsewhere, I feel like tax avoidance/evasion is the second biggest problem humanity faces right now. The rich move most of their money out of the societies they earned that money in, and it sits in off-shore bank accounts, benefiting the account holder far more than it benefits the society where it was earned. I wrote recently about ending excessive inheritance because I wasn’t sure what else we can do about this problem. The biggest current hurdle seems to me to be that there is no global enforcement of tax laws, meaning whatever taxes we impost on our rich, the rich will still find a way out of them. But there could be another way.

I was listening to a conversation with Rory Sutherland, the marketer, recently, where he mentioned a fascinating practice in Rome: those who paid the wealth tax were given their own ornamental columns.

Rewarding Wealthy Tax Payers

According to Sutherland, the idea was to create an incentive to get the rich to pay, rather than forcing the rich to pay. The wealthy Roman would get a column bragging about how rich he was. Another, wealthier Roman would say, “Wait, hold on a minute! Don’t you know how rich I am!?” and would disclose his wealth and pay his taxes to get a bigger column.

The idea is that people often respond better to status symbols rather than social or actual penalties. It’s a variation on the-the carrot-is-better-than-the-stick ethos, only using social status instead of financial incentives.

I think we should try it in our world.

We could do it with buildings, for example. Rich people love to have their names on buildings. The person who pays the most taxes gets a government building named after him.

Or we could do it with even something as simple as a “digital wealth roll” – a list of the richest people in the country, sort of an official version of the Forbes list. You want to get on this, you have to pay your taxes.

The best solution is somewhere in between, probably. Maybe naming new infrastructure projects after people. For example, if you have the highest reported earnings for 2021, you get your name on a new bridge or a repaired stretch of road (which needed to be built anyway).

It’s not hard for me to imagine a world in which a very jealous Donald Trump is trying to trick the IRS into believing he has more money because he wants a bigger monument.

Unfortunately it’s also possible to imagine how some rich people – perhaps many rich people – would not be suckered into this. It might be an idea that needs at least a generation to take effect, especially if the social reward is minimal. I.e. if you grow up knowing about “The Rich List” or whatever the reward is, maybe you really want to be on it.

On the other hand, if it’s a big project, maybe it doesn’t take a generation to have an affect.

More importantly using status symbols to encourage the rich to pay their fair share does not preclude traditional tax enforcement. We can still fine rich people when they are caught avoiding taxes. The status incentive is just an additional reason to pay what you owe. It’s better than “pay what you owe because it’s the right thing to do”, isn’t it?

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