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Cities with declining populations face increasing per-capita costs to maintain discrete public goods—those with fixed costs that cannot be easily scaled to demand. Likewise, growing cities may face decreasing benefits from congestible public goods. In either case, there are two policy actions: limit access (ration) or expand output (higher revenues per person required). We report the results of a series of experiments designed to investigate the effect of alternative rationing rules on the propensity for individuals to support increases in taxes to overcome congestion externalities or decreases in the tax base.

Individuals (e.g., the self-employed and those earning casual wages such as tips) with income not reported to the tax authority by a third party may be less likely to be detected evading taxes relative to the case in which their income is subject to third-party reporting. However, their compliance responses - to changes in the proportion of income that is reported to the tax authority, to changes in audit and tax rates, and so on - are largely unknown, in part because of the difficulty in obtaining information on individual choices in these situations. We use experimental methods to examine individual income tax compliance in settings where individuals differ in the portion of their income that is “matched†(or reported to the tax authority via third-party information) versus “nonmatched†(or not fully reported to the tax authority). Our results indicate that individuals who have relatively more non-matched income exhibit significantly lower tax compliance rates than individuals who earn relatively less non-matched income. Our results also indicate that higher income levels, higher tax rates, and lower audit rates lead to increased tax evasion, but with responses that vary depending upon the proportion of matched versus non-matched income.

Taxpayers unlawfully trying to avoid income tax in most countries can mis-report a wide variety of line items, including income sources, exemptions, deductions, and credits. Such portfolio opportunities, or “modes,” for evasion raise important policy questions. For example, increasing the probability of detection in underreporting of income may increase compliance in terms of income reporting but may decrease compliance as a result of increased evasion through over reporting of deductions. It is possible that the resulting increase in revenue from the mode targeted for increased enforcement effort will be partially, or even fully, offset by deteriorating compliance in other modes. In this article, data from a series of laboratory experiments are used to investigate the compliance behavior of individuals when evasion can be accomplished via multiple items. The findings suggest that increasing enforcement for a single item may lead to revenue declines as evasion increases in other items as an offset.

Not-for-profit enterprises often rely on donors for operating funds. Through fund-raising campaigns, individual donations are solicited, and the successes of fund-raising campaigns depend on various features of the campaign. In this article, the authors use experimental methods to investigate the effects of different types of feedback information during fund-raising campaigns. The basic setting is a linear public good. The major finding is that the nature of information has an impact on individual (and total) contributions and that these effects are systematic. The “optimal” campaign includes information on the relative sizes of received contributions and also offers a suggested level of contributions.