Willingness to pay taxes and perceptions of inequality

Taxes establish networks of interactions between individuals and the state across financial, economic, social, political, and legal domains. For these relationship networks to develop and yield effective outcomes, the involved parties must undertake specific tasks. These obligations primarily involve the state striving to attain optimal tax income through the implementation of appropriate tax policies that minimize losses. Individuals are required to comply with the policies regarding payment. Nonetheless, payment is an unpopular action. The key element motivating citizens to pay taxes is the financing of essential public services. This rationale is the most fundamental and logical one. Nevertheless, studies indicate that this is not the sole determinant influencing individuals to fulfill their tax obligations. Furthermore, the determinants influencing tax payment behavior are notably varied. The sense of belonging to a political community, trust in that community as a member, the inclination to make sacrifices for it, and perceptions of justice and trust in its governance are primary factors influencing the willingness to pay taxes. When society is stratified into classes for several reasons, the propensity to remit taxes may be anticipated to decline. The present thesis seeks to clarify the relationship between perceptions of inequality, which may lead to societal divisions, and the willingness to pay taxes. The literature presents two distinct conclusions regarding this problem. Particularly within the context of the Meltzer and Richard Hypothesis, studies on income and wealth inequality indicate that when disparities escalate in democratic societies, the endorsement for redistributive methods aimed at rectifying them will also rise. In this particular case, it is possible that inequities will not adversely impact the willingness to pay taxes. Consequently, the inquiry emerges: Why do inequities escalate? Literature has multiple explanations. However, some contend that the trajectory of the relationship is distinct. Perceptions of inequality adversely impact the motivation to pay taxes by diminishing the inclination to collaborate. The present thesis utilized logistic regression analysis on the OECD RTM survey data from 2022. The willingness to pay taxes and perceptions of inequality are evaluated from these two distinct viewpoints. The willingness to pay taxes signifies endorsement of governmental policy overall. Perceptions of inequality were classified into six categories: treatment inequality, exchange inequality, political inequality, opportunity inequality, result inequality, and social membership disparity. Adverse impressions of exchange, treatment, and political inequality are more likely to diminish the motivation to pay taxes. The examination of outcome inequality data does not yield a definitive understanding. Adverse views of opportunity disparity and social membership inequality are more likely to positively influence the willingness to pay taxes.