In the United States, there is widespread antipathy toward taxation, yet at the same time there are substantial voluntary donations to nonprofit organizations with missions that are parallel to those of many government agencies. In this paper we compare giving in the form of voluntary taxes paid to government agencies with giving in the form of voluntary donations to nonprofit organizations that have similar missions. In a laboratory experimental setting, subjects are given an endowment, and are given the opportunity to donate any part of the endowment to a government agency or to a nonprofit organization. We compare levels of giving to private and government organizations for four different causes (cancer research, disaster relief, education, and parks and wildlife) at three levels of government (federal, state and local). Within a session, subjects make 12 decisions: they complete all six separate decisions for each of two causes, selected randomly from the four listed above. We find that people are not averse to giving to government. On average, they give 22 percent of their budget to government when anonymity is ensured and giving is completely voluntary. However, they do show a preference for nonprofit charities by giving higher amounts for most causes and levels of government. The willingness to give is influenced by the cause and level of the organization, as well as perceptions of the organization.
Grossman, Philip; Eckel, Catherine; Li, Sherry Xin; and Larson, Tara, "Giving to Government: Voluntary Taxation in the Lab" (2008). Economics Seminar Series. 5.