To meet the public’s preference for negative content. the media tend to overreport negative news. Miloš Fišar, Tommaso Reggiani, Fabio Sabatini, and Jiří Špalek write that this negativity bias in the coverage of economic policy issues decreases tax compliance. Conversely, when people are exposed to authentic information about the appropriate use of tax revenues, compliance increases significantly.
Why do we pay taxes? Not just because of the fear of audits and penalties. Satisfaction with government action and trust in institutions may also play a role in tax compliance.
Economic theory suggests that citizens believing that the government does not spend their taxes well tend to reciprocate by refusing to pay their entire tax liability. Instead, suppose that the prevalent belief is that institutions use taxes to fund public goods and services adequately. In that case, taxpayers will be more willing to comply, as if a “psychological contract” with authorities was in force. Such a contract relies on the fairness of the political process and the legitimacy of the resulting policy outcomes.
These perspectives imply a vital role for information about government action and the political process. The media coverage of economic and policy issues, however, is far from balanced. Mass media tend to overreport negative news as they generate stronger psychophysiological reactions in the audience, and they better fit the public’s preference for negative content. This negativity bias creates a ‘spiral of cynicism’ in the industry. The public’s demand for sensational news strengthens the incentive for providing negative content to journalists and newsmakers. The recent spread of anti-establishment narratives related to the rise of populist movements has further exacerbated the negativity bias in reporting about the efficiency and fairness of public institutions.
How does this negativity bias in the coverage of economic policy issues affect tax compliance?