Why 1 in 3 Americans Might be Cheating on their Taxes

This is the second time in recent months I’ve found myself riding the coattails of Dan Ariely, author of Predictably Irrational, The Upside of Irrationality and most recently, The Honest Truth about Dishonesty.

With the approach of April 17, the last day to file taxes  in the United States, Ariely wrote a blog post on Taxes and Cheating. There’s an old saying from Ben Franklin, “There are only two certainties in life, death and taxes,” and apparently people would like to “cheat” both.
Cheating on taxes was in the headlines several years ago because Tim Geithner, Treasury Secretary for the United States, was questioned by Congress for failing to pay about $40,000 in taxes while he worked for the International Monetary Fund. On the surface it’s easy to conclude if people see someone cheating on their taxes they’re more likely to do so as well but is that supported by hard evidence? This question prompted Ariely and colleagues to conduct a little experiment to see if more people would cheat when they saw others cheating.
I’ll leave to you to read Ariely’s blog post on the subject if you want details on the experiment but for our purposes I’ll simply note the results – people cheated more when they saw others cheat. And, there was more likelihood of cheating when the cheaters were similar in some way (i.e., went to the same college) to those who observed them cheating.
If you’ve read my blog for any length of time, Ariely’s conclusion should not surprise you because it’s simply an application of Robert Cialdini’s principle of consensus, otherwise known as social proof or peer pressure. This principle of influence tells us we are influenced by the actions of others. The more people that are involved, the more we are influenced or the more similar we see those others to ourselves, the more we are influenced by their behavior.
For example, kids will be influenced to smoke when they see other people smoke, such as their parents. However, when teens have two or three friends who smoke, the odds that they’ll take up the bad habit are astronomically higher than the example set by parents. Why? Because they take their cues on how to act far more from their peers because they want to fit into that social group. Thus we get the term “peer pressure.”
Here’s another experiment to convince you. Trick-or-treaters in Seattle were observed on Halloween. When a single child came up to the door, he or she was told to only take one piece of candy; then the parent walked away. The child now has a dilemma; he knows what to do but also knows he could get away with taking more than one piece and no one will be the wiser. Only 7.5% broke the parent’s rule and took more than one piece of candy. Not bad.
It gets interesting when the kids came to the door in groups. With the same set of instructions, more than 20% of kids took extra candy! Why did the number almost triple? Simple; when that small percentage of kids who would take extra even if alone were observed by their friends, the friends decided they too should get more candy. This is a classic example of peer pressure that parents are always warning kids about.
It’s no coincidence that I posted this the day before Americans are supposed to have their taxes filed and paid this year. In 2001 it was estimated 30%-40% of Americans cheated on their taxes shortchanging the government about $345 billion and more recent estimates are still in that range! With record deficits we need every penny to pay down our debt but how can the government expect the average citizen to be honest if the person running the U.S. Treasury is either dishonest or too inept to understand the tax code? You and I can’t solve that one but at least we can be more cognizant of consensus in both how to ethically use it, and avoid its potential negative impact on us.
This wasn’t as taxing to write as you might think.
If you’re viewing this by email and want to listen to the audio version click here. If you want to leave a comment click here.

Brian, CMCT
Helping You Learn to Hear

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