Does trust increase willingness to pay higher taxes to help the needy?

Abstract

The article studies the causal effect of trust on the willingness to pay higher taxes to help the needy in a sample of 29 countries of Eastern and Southern Europe, and the former Soviet Union and Mongolia. It is hypothesized that interpersonal trust leads to a greater willingness to pay taxes to help the needy since (i) trust increases the likelihood of helping strangers; (ii) trust fosters solidarity and cooperation when working to solve common problems in society; and (iii) trust reduces suspicion with respect to the perceived misuse of redistributed money. Three key findings are that the more people trust each other, the more they are ready to support the welfare state; the effect of trust on welfare state support holds even in a contextual environment characterized by rather lower levels of trust and relatively underdeveloped systems of redistribution; and higher individual‐level trust fosters tax morale and helps deter tax evasion.

Citizens' Trust in Government and Their Greater Willingness to Pay Taxes in Tanzania: A Case Study of Mtwara, Lindi, and Dar es Salaam Regions

“…For instance, Hyungna and Hong (2012) found a positive relationship between the citizens' trust in the government and their WTP. Habibov et al (2017aHabibov et al ( , 2017b found that an increase of social trust is associated with a greater WTP more taxes to improve public healthcare. They argued that more trusting individuals are more WTP taxes in order to support improvement in healthcare.…”

“…Citizens obtain some level of satisfaction from consuming public goods and services, and they are WTP for improvement in public services due to higher derived utility. It is hypothesized that interpersonal trust leads to a greater WTP taxes (Habibov, Cheung, & Auchnnikara, 2017a, 2017b, and individuals with a higher degree of institutional trust have greater support for government policies. Figure 1 explains the theory of trust and WTP for public goods.…”

“…Their model was designed for an optimal level of trust, taking advantage of the initial beneficial effect of increasing trust while avoiding the negative effect of excessive trust. Habibov et al (2017aHabibov et al ( , 2017b) study the causal effect of trust on the WTP higher taxes to help the needy in a sample of 29 countries of Eastern and Southern Europe. Their findings showed that interpersonal trust leads to a greater WTP taxes to help the needy since trust fosters solidarity and cooperation when working to solve common problems in society.…”

“…Three key findings indicated that the more the people trust each other, the more they are ready to support the welfare state; the effect of trust on welfare state support holds even in a contextual environment characterized by rather low levels of trust and relatively underdeveloped systems of redistribution; and higher individual-level trust fosters tax morale and helps deter tax evasion. Habibov et al (2017aHabibov et al ( , 2017b also investigated the effect of social trust on the WTP more taxes to improve public health care in post-communist countries. They found an association between higher levels of social trust and better health to reflect the notion that social trust is positively associated with support for public health-care system through its encouragement of cooperative behavior, social cohesion, social solidarity, and collective action.…”

Social security compliance in times of crisis. Evaluating the factors for non-compliance in the HORECA sectors in Greece

“…In order for social contributions to avoid such a disincentive correlated to public taxes, a tight link must be established. Other scholars believe that trust in the welfare state is correlated with a greater willingness to help the needy (Habibov et al, 2017), focusing on redistribution rather than on the adequate replacement of accrued contributions.…”