Education has positive impact on tax morale for net beneficiaries of the welfare state, &a negative one for net contributors

Education and tax morale. David Rodríguez-Justicia, Bernd Theilen. Journal of Economic Psychology, https://doi.org/10.1016/j.joep.2017.10.001

Highlights
•    We analyse two channels through which education shapes tax morale.
•    Tax morale of net receivers of welfare state benefits increases with education.
•    Tax morale of net contributors to the welfare state decreases with education.
•    A fairer tax system and better institutions raise tax morale of the highly educated.

Abstract: While the determinants of tax morale have been widely studied in the literature, surprisingly, the fundamental influence of education on tax morale has yet to be investigated. Given the insights from the psychological and political science literature about the role of education in the formation of social values, in this paper, we analyze two channels through which education shapes tax morale. We find that education has a positive impact on tax morale for those individuals that are net beneficiaries of the welfare state, and a negative impact for those that are net contributors. Furthermore, our results indicate that the more highly educated because of their better knowledge on public affairs exhibit higher levels of tax morale in countries that have better quality public services, a fairer tax system and higher quality institutions.

JEL classification: H26; H52; I25
Keywords: Tax morale; Tax compliance; Education; Welfare state benefits; Trust in public institutions