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Deterring Property Tax Delinquency in Philadelphia: An Experimental Evaluation of Nudge Strategies

Michael Chirico, Robert Inman, Charles Loeffler, John MacDonald, and Holger Sieg

Abstract:

Municipal governments commonly confront the problem of tardy or delinquent property tax payments. We implement an experiment in property tax collection for tardy taxpayers in the City of Philadelphia for the calendar year 2015. The experiment sent one of seven reminder letters to the tardy taxpayers, testing the efficacy of a simple reminder; two alternative reminders stressing economic sanctions; and four alternative reminders emphasizing either that taxpayers receive neighborhood services or city-wide services for their tax payments, that most of their neighbors pay their taxes on time, or that as a citizen in a democracy it is a civic duty to pay taxes on time. Compliance behaviors were compared to a holdout sample that received no reminder letter. The most effective letters were those that threatened an economic sanction for continued non-compliance. These letters were particularly cost-effective in raising additional city revenues. There was no evidence that those receiving a reminder for calendar year 2015 improved their tax compliance behavior in calendar year 2016.

Citation

Michael Chirico, Robert Inman, Charles Loeffler, John MacDonald, and Holger Sieg (2019), Deterring Property Tax Delinquency in Philadelphia: An Experimental Evaluation of Nudge Strategies , National Tax Journal, 72:3, pp. 479-506

DOI: dx.doi.org/10.17310/ntj.2019.3.01