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2020 Government Innovation Awards

When overdue tax notices are easy to understand, they get paid

Taxpayers are more likely to pay overdue taxes if the letter in their mailbox is clear, concise, and easy on the eyes. The Pennsylvania Department of Revenue teamed up with MITRE to create the Nudge Notice Proof of Concept project – using behavior science to get taxpayers’ attention and encourage payment with creatively designed notices.

DOR Nudge Notice Proof of Concept

Pennsylvania Department of Revenue

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It’s all about how people make decisions said Laura Leets, a principle social scientist at MITRE who worked on the project. If a message is clear, people are able to make better choices. “Specifically, we simplified the text using plain language to help people understand their tax obligations,” Leets said. “We also simplified the format so people could quickly glance at the letter and comprehend what they owed, their payment options and the consequences if they didn’t respond.”

Once the team had design options in place, they began testing the theory on taxpayers to see how they would respond. Redesigned notices won by a long shot, said Christopher Pressley, a revenue analyst at the department who headed up the project. “We looked at how taxpayers … responded to the initial notice and how they responded to the redesigned notice. Those taxpayers that received the new notice actually responded more than the ones that received the computer generated.”

Not only did recipients respond at a greater rate (50 -100% more), a taxpayer with a redesigned notice paid down (on average) 38-69% more of their debt. While the pandemic has halted many collection processes, putting results of the project on hold for a bit, the team is confident that once everything is back up and running, their success rates will continue. Plus, it is very cost-effective way to encourage what have turned out to be excellent results, said Kevin Milligan, special advisor to the deputy secretary for taxation at the department. “How expensive are notices? It’s about the cheapest thing we can do.”

Based on this project’s success, the department is exploring other ways it can use behavior science, said Milligan. “We want to encourage certain other behaviors like eFile or ePay. It’s not all about backend compliance. It’s about getting taxpayers to be efficient and provide them with customer service as well.”

About the Author

Suzette Lohmeyer is a freelance writer based in Arlington, Va.

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