Giving to government: Voluntary taxation in the lab

In the U.S., widespread complaints that taxes are too high exist alongside substantial voluntary donations to private charities whose missions parallel those of government agencies. We employ a "real donation" experiment to compare giving to government agencies and private charities with similar missions, for four different causes (Cancer Research, Disaster Relief, Education Enhancement, Parks and Wildlife) at three levels (national, state, and local). We find that individuals will give to government, paying voluntary taxes to support specific functions. Donations average 22% of an endowment to government, significantly lower than the 27% to private charities. The difference is influenced by cause, level, and perceptions of effectiveness and efficiency, as well as individual characteristics such as income and political affiliation.

Research Highlights
► We design a lab experiment to compare giving to government and private charities.
► Subjects give 22% of $20 endowment to government with specific functions.
► Private charities receive more donations than government agencies.
► The difference in giving is affected by cause, level and perceptions of efficiency.
► It suggests voluntary donations as useful additional funding source for government.