A Thought About Our Brains on Tax Day

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Why do we pay taxes? No, not “why does the government impose taxes?” In order for the state to provide at the very least some basic services — military, courts, police — someone’s going to have to pay something. And it’s going to have to be coercive.

What I mean is: Why do we pay taxes? Why do we comply with what the IRS asks of us? Why don’t we cheat more?

Let me propose three factors:

1. We overestimate the possibility of getting caught / being audited: In a poll conducted for the IRS Oversight Board, 68 percent of Americans said it was their fear of an audit that made them pay taxes. Meanwhile, less than one-fifth of one percent of taxpayers face a face-to-face audit in a year. Even if more Americans understood how few audits are conducted, they’d still significantly overestimate the risk. That’s because we’re wired to overestimate tiny probabilities — it’s the same reason people fear getting struck by lighting, why they play the lottery, why people in the Midwest worry about terrorism.

2. We don’t see the rewards as high enough to justify the risk: Related to overestimating the risk of an audit is the concept of “loss aversion” : the fact that we fear loss more than we value gain. You’d have to see a pretty big upside to cheating on your taxes to convince you it was worth the risk. With the economy in such terrible shape, however, and with people struggling, they may begin to see more benefit to cheating (they need to hold onto that money more). This Freakonomics symposium on tax cheating predicts a rise in tax cheating under Obama.

3. We’re conditioned to:We like to believe that morality is from God or some higher self. But social science increasing shows us that morality is hardwired into the brain — a set of pro-social behaviors beaten into us by evolution, not by God or even by our more enlightened selves. If we weren’t raised to cheat on our taxes, or don’t know people who cheat on their taxes, we’re highly unlikely to do so ourselves. Monkey don’t see, monkey don’t do.

Just something to think about on April 15: You’re essentially a moist robot, in Scott Adams’ phrase. That’s why you pay your taxes.