« Freakonomics Radio

121. The Tax Man Nudgeth

2013-04-03 | 🔗
Real tax reform may or may not ever happen. In the meantime, how about making the current system work a bit better?
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This podcast dynamically inserts audio advertisements of varying lengths for each download. As a result, the transcription time indexes may be inaccurate.
Thanks to Pennsylvania, lottery, scratch, ass, pennsylvanians or scratching their way to fine and with new every month, big top rises and second chance, drawings, excitements, always in order so try, Pennsylvania, lottery, scratch offer your ticket to fund and get yours. Did I keep on scratch? It must be eighteen or older. Please pay responsibly benefits older pennsylvanians. Every day for economic radio sponsored by three m. What do the adhesives used in both posted note? in aeroplanes have in common. They both made with innovations from three m. In fact, there are lots of three M products: hiding in plain sight that you might not realise, including in lending I've respirators in response to that The banking pandemic three M has increased respirator prick. Option to make more respirators than ever before, helping those on the front I now continue the fight, learn more at three m dot: com, slash covert
from a p M american public media and w and Y see this is broken. Onyx radio on marketplace. Here's today's host of marketplace! Sarah Gardner! It's for economics! Time! Every couple weeks we talked to Stephen Abner he's co, author of the books and blog about the hidden side of everything. Stephen, it's good. To talk to you great to talk to you, sir. Thanks for having me, it is a problem which has every taxpayers favorite money. Oh yes, I thought today. What we should do is take Look at the tax code we're stuck with for now and see if there are some improvements, however, slight, that we should be thinking about ok, so what kind of things are we talking about here? Well, One of the biggest failures of the current system is also the most obvious, which is that the Irish fails to collect a huge portion of the taxes that are levy.
There are legitimately. Oh it's about seventeen percent of the total tax bill, which is more than four hundred and four. The billion dollars a year were: what's it say that again, seven? Fifteen percent prettier sounding it's a big number to call the text. About forty fifty billion dollars a year. The biggest contributor to this gap by far is very simple cash. It's all the cash that people earn and simply don't report to the IRS Austin ghouls be was the top white US economist under President Obama, we asked him why the government doesn't go after all that easy money most of the non collected money, for example, could be tracked and hunted down if you required small businesses to really report everything about their activity. But nobody wants to do that because it be so onerous and such a pain in the rear for small business owners that as a policy decision, they want to do it so in
There were Stephen politically it's too dangerous and be like, like the small Business Harassment ACT, if they wouldn't have, they went after small businesses really are exactly even though these people are supposed to happen. Taxes on that money and even though interest and leave the rest of us who don't pocket a lot of unreported cash, you know we're subsidizing them, that's not to say that there are ways to nudge people to pay their taxes without hunting in tracking down as obstacles, because one of my favorite examples of this comes from a small in the british government called the behavioral insights team in what they do is experiment with all kinds of cheap and simple nudges. Prince and sending out letters that appeal to the herd, mentality and all of us here is the units director David Halpern. So what we do is we simply tell people something which is true, which is nine out of ten people in Britain pay their tax on time and by putting that single
bit of information into the top of the latter. It makes people much more likely themselves to pay the tax on time. So it's very peer pressure. It's exactly we like to run with the heard that they also try another super simple trick, which was just hand right a message on the outside of the tax envelope. This message would you say simply that the contents are important, but it's written in hand because people like, oh my god, but how cannot possibly be practical? Well, we ve not just got the results in. It turns out for every pound or every dollar. You spend ongoing somebody, right on the envelope, you get two thousand dollar return to one to two thousand return. Since nice simple illustration of these small things and how consequential they are. So it sounds like peer pressure and the personal touch that than those aren't. Bad idea is really there.
Great ideas, their small there on the margin- and they also have the collective result of trying to make taxpaying a little bit more on a fun is the right word. But you know the way the tax system is currently set up. We see paying taxes as pure downside right. Not only does it costs money, but it's on top of that, it's complicated it gives annexed and may be worst of all, any given person has practically no say in how you are harder and tax dollars are actually going to be spent right Oh damn aerial, use a behavioral psychologist Duke he has a nice idea. It's too let taxpayers direct a small portion of their tax money to the parts of the government that they most care about Sancho S, direct percent, five percent, ten percent. But what if we get people to have a say in, but with some of the Texas GO all of a sudden you just looking at because you against the government you'd have to look carefully at all that the government
he's doing for us, building libraries and roads and education, military, sun and so forth and say what do I care about? I don't know about That I mean what do you think I would be fascinating to see how many people would really want to say gee. I want to put more money into defence or Medicare her. Lot of mood, but a lot of military families out there who really feel like the military gets a shorter. If that's the thing, but you're right that the first thing he said, I agree absolutely with we don't really know, because we ve never really asked, and we ve never really given the opportunity for people to say so, Stephen. What about you? Where would you put your five or ten percent? Oh, I think that's pretty obvious area, don't you think I'd I'd, send it to a slut and for people who make radio about economics. Look Stephen Dub near our Freakin comics correspondent who puts out a pot cast to you, can get that on Itunes and hear more at for economics, dot com, Stephen! It has been a pleasure
thank you so much for back pay packets listeners. You heard a little bit this episode from David Halprin, who runs the british government's behavioral insights team. They are more info really called a nudge unit after the book nudge by the American academics Richard Sailor and cast Sunsetting helper himself? Is an academic very well regarded courage in to me at least to see him putting so many academic ideas to work in a government job? So let's hear a little more from our interview with help, and here he is talking generally about the nudge units mission, Do we think the term if you have it
U S, understanding of how people actually make decisions or tries behavior. You can design policy, that's better! It's cheaper! It's easier! It's more effective for people! I'm so, for example, people off the more about you know how we he's a tax of zeal to get more people in parliament or saving or whatever it will be. We're obsessed about the tiny details are obsessed about the little inconveniences and hassles again away of people being at a do. Things which may be of traditional got a lot less attention, not only cause. You know they cannot be annoying for citizens, but if you can get rid of those frictions, those details, those problems, everything works better. So the nod unit. Now People with experiments with clever incentives, often in areas that most of us don't give much thought to attics, for instance, one nice one. We, which idea may appeal to people over there is it Large numbers of people haven't insulated their homes enough in Britain, and even though
years. We offer great big subsidies to encourage people to insulate their home thieves thinking. This is a no brainer right, as we would say you get your money. Back in the first year, so one on people insulate that Olaf's erratically gives equal aunt em workers you look into the reason why most people don't do is cause they're attics full of stuff? should have thrown out years ago and that's the real reason so giving them ever bigger subsidies doesn't really work very well. So we were going to trial instead by offering people than acetic clearance scheme which thyroid have to pay for, but it's fine, and then we found that I increased by three hundred and twenty five fall to the uptake of people. Getting there ethics insulated and it didn't require more money or subsidy from government. It just required offering the service in a way which was convenient for people. Maybe it's just
back, then I don't know, but help strikes me is quite clever, maybe also wise and there's the novelty of hearing about a government trying to make life simpler for citizens rather than more complicated. While I have for many people their experience This will ultimately is it'll just be easier. Just life will be easier instead of thinking of your taxes, I'm fine! No one wants to pay their taxes, probably right, but these let's make it as easy as possible and as frictionless possible and you letters which are tailored to you and so on. So you'll get a sense of government which is really efficient and effective and in the way it operates in its details, and that's true, of course, it particular around Bulgaria's policy. Be it from me no person. Economic growth or improving fuel efficiency or a million other things,
so that was David Halprin from the british government's behavioral insights team coming up on the next week. Anaemic, radio? We ask a seemingly simple question: how much does your name really matter? from the unusual names. Can you give us your full name issue Yo shipping, hey no Augustus, Eisner Alexander. Why sure Knuckles chairman Jacob Connally to the black and white names molly? Madeleine Caitlin and Emma Money, ebony precious data diamond to the red and the in the conservative house, the girls would have names like Casey, Mackenzie, Jordan, Taylor and Sarah in Ireland, the house they would have names like low long MIA Thea Elliot, and Ruby everybody's got a name. What does
where's say about you, that's next time on for economics, radio.
Transcript generated on 2021-03-15.