Ideological alignment, public sector size and tax morale: empirical evidence from OECD economies

Article  -  Wednesday, 5 June 2024

Rodríguez-Justícia, D. and Theilen, B. (2023): "Ideological alignment, public sector size and tax morale: empirical evidence from OECD economies", Humanities & Social sciences Communications

This paper examines the relationship between the ideological alignment of citizens with their governments, the size of the public sector, and taxpayers' intrinsic motivations to pay taxes. By analyzing data from the World Values Survey and the European Values Study for 23 OECD economies from 1995 to 2018, the study uncovers distinct patterns in tax morale based on ideological differences. Key findings include:

1. Right-Wing Ideological Stances and Tax Morale:
   • Citizens with right-wing views experience a significant decline in their intrinsic motivation to pay taxes when the size of the public sector exceeds the OECD average. This suggests that these individuals are less supportive of large public sectors and may perceive excessive government spending as inefficient or misaligned with their values.
2. Left-Wing Ideological Stances and Tax Morale:
3. In contrast, citizens with left-wing views show a higher intrinsic motivation to pay taxes when the public sector is smaller than the OECD average. This indicates that left-leaning individuals might support greater public sector intervention and feel a stronger civic duty to contribute to public funds, especially when they perceive a need for increased public sector activity.

The study's analysis highlights how ideological alignment with government policies and perceptions of the public sector's size can significantly impact taxpayers' willingness to fulfill their tax obligations. This nuanced understanding can inform policymakers about the importance of considering ideological perspectives when designing tax policies and public sector policies that affect public sector size.

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