The income tax system has become a critical foundation for modern democracies, providing the primary means of financing the expansion of rights and obligations. Thus, the tax system provides a critical research site for understanding not only compliance with tax obligations, but also for understanding the broader relationship between democratic citizens and their government. In this Essay, I will elaborate on the adaptive contractarian perspective and apply it to the obligation to pay personal income taxes—the financial foundation of modern governance. The goal of the forthcoming book from which this Essay is taken is to empirically test the relevance of this perspective for explaining both the main features of the tax system and citizens’ compliance with tax obligations. Additionally, we (the book’s authors) will consider the implications of this perspective for the design of tax enforcement systems and policies. We hypothesize that citizens obey tax laws to the extent that other citizens and governmental institutions meet their related obligations, and that the coercive institutions of governance, in turn, are compelled to respect citizens’ rights.
Taxpayer compliance, Income tax, Contract theory