Are Fairness Perceptions Related to Moral Licensing Behavior? Evidence From Tax Compliance

Donna Bobek, Amy Hageman, Cass Hausserman

Journal of Business Ethics · 2025 · Volume 198 · Issue 1

Abstract

This study investigates how the presence, and subsequent repeal, of a tax incentive for a prosocial behavior influences fairness perceptions and tax compliance for those who are and are not eligible for the incentive. Results of a multi-round experiment with 309 U.S. taxpayers show that individuals who engage in the prosocial behavior of making a charitable donation do not exhibit moral licensing behavior. Instead, those who give, versus do not give, engage in higher levels of tax compliance. In fact, we even observeconsistencyfor those with the most motivation to morally license—those who donate to charity but also perceive the tax system asunfair. In addition, tax system fairness perceptions only influence the compliance decisions of individuals who donotengage in the prosocial incentivized behavior. Finally, we also show that a tax incentive for charitable giving is effective. Those who are eligible for a charitable-giving related tax incentive are more likely to give to charity than individuals who are ineligible for such an incentive; additionally, these incentivized activities decrease by one-third when the incentive is repealed. The study results add to the literature on moral licensing, charitable giving, and tax fairness and have several policy implications. We confirm that tax incentives are, on the margin, effective at encouraging prosocial behavior and that perceiving the tax system as unfair can reduce the tax compliance for some individuals. In particular, our results suggest that focusing scarce audit resources on non-donators may be an efficient way to detect non-compliance.

Keywords

Tax incentives, Tax compliance, Fairness, Moral licensing, Charitable giving

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