The rewards of taxation. And donation.

This is funny in a geeky sort of way. Newsbusters, the conservative Media Research Center's blog created to "not only prove — through sound scientific research — that this bias exists, but also to neutralize its impact on the American political scene" decided to tackle some results they found skimming New Scientist.

New Scientist: People Love to Pay Taxes? Absurd 'Study' Presented as Fact
Posted by Warner Todd Huston on June 15, 2007 - 06:25.

If this isn't junk science, then nothing meets the requirement to be called such! A new, money wasting university "study" was written about by New Scientist Magazine [...] this month that was presented as a "surprising discovery" somehow "proving" that people secretly love to pay taxes. And people wonder why "science" can be so easily scoffed at these days... or why it's so hard to believe what you read.

On top of the bad reporting, this story is more proof of the constant waste of money that is perpetrated by our National Universities. Instead of teaching useful information and conducting meaningful studies, this University is trying to "prove" that people really secretly LOVE paying taxes.

Gee, why do they want that little absurd concept floating out there, do you think? And why is this news outlet propagating this foolishness?

It's likely Warner Todd Huston never bothered reading the original article appearing in Science (maybe because it's subscription restricted?). The experimental paradigm involves a number of trials in which the subjects were told that they were going to receive $100, but of that money either $0, $15, $30, or $45 would be set aside to go to a charity. In some trials the subjects had no choice in how much money they would give to the charity (simulating a mandatory "tax") in other trials the subjects had a choice in either accepting or rejecting the amount presented to them (simulating a donation to that charity). In most of the trials, however, subjects were told the "taxation" amount and then asked to accept or reject the voluntary donation they were asked to give in addition to the tax. All monies collected from the subjects (either through the tax or the voluntary contgribution) went to the Lane county food bank.

Results: the lower the mandatory part was, the more willing the subjects were to accept the proposed donation amount:


Granted, the NewScientist article wasn't entirely effective at pointing this out, but you'd think that rather than scoff at this study, an ultra-conservative place like Newsbusters would wholeheartedly embrace such a finding. After all, the conservative mantra is that if we lower taxes there'll be more charitable giving, therefore helping society more than high taxation rates would. But oh no, they saw the word tax used in a positive way and went off the deep end:

What unbelievable balderdash! This "study" is so obviously flawed and absurd that it boggles the mind.

The truth is this flawed study treated taxes and charitable giving as one and the same function, a fatal flaw at the heart of their attempts to "prove" anything.

The study goes on to compare the brain scans of people giving charitable donations to those who are "paying taxes" (not that their study actually has anyone really paying taxes in it). The entire concept, however, makes a fundamental mistake in definition. Taxes are NOT charity. They are forcible redistribution of income -- even if for legitimate reason in some cases. Charity and taxes are in no way comparable. Further, it shows that these concepts have not been taught to these students before this idiotic study was conducted and no control group of people chosen for their proper understanding of the definitions of taxes and charity was assembled for this program.

This misses the point, which is to dissociate the reward of voluntary giving from that of simply giving. From the Science article:

Every society needs public goods, but the mechanisms used to fund them vary. For example, taxation and government spending are lower in the United States than in most European countries, but philanthropy is higher (1). To economists, this charitable giving is a puzzle: Money is a good, so why are people willing to give it away? One possible explanation is in terms of a "pure altruism" motive (2). Individuals with such a motive receive satisfaction from increases in a public good, such as the provision of basic services to the needy. This altruistic concern provides a motive to give, but there is also an incentive to keep money for oneself, because the cost of such charity is entirely paid by the giver, whereas the benefits are spread out over all those people who care about the needy. Only those people with a very large pure altruism motive would give voluntarily, and taxation is the normal social solution to the resulting free-riding. Pure altruism implies that people should get some satisfaction even when public goods are supplied through mandatory taxation, because, by this account, people care only about how much of the public good is provided and not about the process by which the transfer occurs. A second possible motive for charitable giving is the sense of agency associated with the act of voluntary giving. This reward from giving has been termed "warm glow" (3, 4). If givers were driven exclusively by the warm-glow motive, they should derive satisfaction from making a voluntary gift, rather than from the increase in the level of the public good itself. On the other hand, taxation should not produce a warm glow, because paying taxes typically does not involve a voluntary choice.

The distinction between pure altruism and warm-glow motives for giving is important for several reasons. First, if giving is motivated by pure altruism, tax-funded government expenditures to provide a public good will reduce private giving, potentially dollar for dollar, as people cut their voluntary contributions in response to these higher taxes (5). There should be no similar effect with warm-glow givers, as their benefit derives from the amount of their gift. Second, a warm-glow motive for altruism provides an argument in favor of policies that encourage voluntary giving, because the warm-glow benefit provides a reward to the giver that exceeds the benefit from paying an equivalent amount in taxes (6).

Of course the concept that some people might accept taxes should never enter the minds of a Newsbusters reader. In fact, similar studies have been performed in the past that have yielded similar results. This study simply links the actions of the subjects with brain reward circuitry as measured using fMRI. The results of this study actually show...

...that both the increased payoffs and the ability to choose lead to increased neural activity and satisfaction

In other words, though the reward circuitry is activated when a subject is forced to pay, it's activated even more if the subject can choose to donate or take home the money. Imagine that. Hmmh. That sounds rather libertarian, don't it? But not for Warner Todd, who's found flaws in the study's methodology:

Problem #1- GAVE

These girls were not spending their own hard earned money. It was money that was simply handed to them with no efforts on their part past signing up for the study. These girls had no emotional attachment to the money, no sense of having earned it, no real assumptions that it was "theirs" at all. It was merely Monopoly money used for this study in their minds. It should be no surprise, then, that these subjects had no adverse reaction to the "spending" of their $100 on taxes.

No effort? Spending two hours sticking your head into an fMRI for 13 minutes at a time? As for "monopoly money," they were paid one randomly chosen voluntary and one randomly chosen mandatory scenario at the end of the day. Cold hard cash. More Warner Todd:

Problem #2 STUDENTS

Chances are, the bulk of these same girls don't work for a living, either. So, their experience with earning money that they are utterly dependent upon for themselves and their family is also an emotional concern they are not accustomed to. They are probably taken care of by grants, loans and parents' funds, so they have little understanding of the "worth" of the $100 they were handed.

Wow. Just wow. Here's what the methods section tells us about the subjects...

Our sample included 20 female subjects recruited from the population of economics and psychology students at the University of Oregon. Female subjects were selected to control for any potential inhomogeneities in brain structures between genders, and because variation in charitable giving decisions was a critical component of our analysis and behavioral evidence suggests greater price sensitivity to giving in females

WTodd, the "sensitive" male concludes:

Another thing that makes this study completely meaningless is the lack of context. Few sensible people are against taxes just on principle. Even die hard tax protesters understand that taxes are a necessary evil at some level. But, context is important to the question of taxes. How is it being spent? Is the government program effective? Is it free of graft? These questions change the desire of people to pay taxes and must be answered to fully study people's true reactions to taxes.

Further, there is a difference between the personal satisfaction of giving to a charity and feeling of "pleasure" from having helped someone else and the different emotional "pleasure" of having done your duty as a citizen when paying taxes. Duty is a personal satisfaction based on a sense of accomplishment for yourself first. Charitable giving is a "pleasure" of having helped someone else. Yet, both feelings can be erased or materially harmed when the money thus given is misused. This study neither takes any time to quantify the two feelings of "pleasure" nor factors in the ultimate use of that money.

All these deficits of logic and method makes this study a farce.

But, here we are being told of the "surprising discovery" of this study which is presented as if it is all ascertained fact. This "secret pleasure" is presented as some amazing, unexpected human reaction to taxation.

And, again, why would such a study be made? Is this another effort to soften the blow of taxation? If so, this is quite against the grain of the American experience which has been built on decades of a dislike of taxation and a mistrust of government.

In the end, all we have here is propaganda for the left from New Scientist and the University of Oregon.

I'll just let the authors take care of that one:

In summary, we find that three very different things—monetary payoffs to oneself, observing a charity get money, and a warm-glow effect related to free choice—all activate similar neural substrates. This result supports arguments for a common "neural currency" of reward (25–29) and shows that this model can be applied not just to choice over money, risk, and private consumption goods, but also to more abstract policy choices involving taxation and charitable giving (12). Our results are also important for understanding why people give money to charitable organizations. First, these transfers are associated with neural activation similar to that which comes from receiving money for oneself. The fact that mandatory transfers to a charity elicit activity in reward-related areas suggests that even mandatory taxation can produce satisfaction for taxpayers. A better understanding of the conditions under which taxation elicits "neural rewards" could prove useful for evaluating the desirability of different tax policies. Second, we show that the opportunity for free choice is associated with increased activity in regions implicated in processing rewards, as well as with higher reported satisfaction. Furthermore, this effect is not entirely accounted for by increased payoffs. In the context of charitable giving, this choice-related benefit is consistent with a warm-glow motive for giving.

In combination, these results suggest that both pure altruism and warm glow are important motives for charitable giving. Future work may reveal whether the free-choice effect found here extends to other situations, and under which conditions taxation elicits "neural" rewards. A related question is whether people who vote for a tax to provide a public good get a warm-glow benefit. Last, public goods by their very nature are seldom traded in markets, and so we cannot observe the prices people will pay and then use these to measure value. The finding that neural activity predicts voluntary donations suggests that such activity could eventually help measure values and determine optimal levels of public goods.

Will these people ever stop attacking science as having a perceived "liberal" slant?