TRUST AND TAXPAYING - TESTING THE HEURISTIC APPROACH TO COLLECTIVE ACTION

Theory: Trust is a critical attitude that extends the duty heuristic d eveloped in Scholz and Pinney (1995). The ''trust heuristic'' can prov ide the basis for a contingent compliance strategy capable of sustaini ng cooperative solutions to collective action problems of governance i f two conditions are met. First, compliance with laws must be conditio nal on levels of trust in specific legal arenas. Second, a citizen's t rust in government and trust in other citizens' willingness to obey th e law must reflect the costs and benefits associated with obeying laws . Hypothesis: This article tests the first hypothesis in the tax arena : trust in government and in other citizens increase compliance over a nd above the levels expected from an internalized sense of duty to obe y laws and the fear of getting caught by enforcement agencies like the IRS. Method: We test the hypotheses with regression analysis of surve y and tax return data from a stratified sample of 299 middle- and uppe r-income taxpayers, using the newly-developed two-stage conditional ma ximum likelihood analysis to control for endogeneity. We extend this a pproach to the analysis of multi-categorical ordered dependent variabl es. Findings: Both dimensions of trust significantly increase the like lihood of tax compliance, even after controlling for duty, fear, selec tion bias, and potential endogeneity effects.