The Effect of Accounting Information on Taxpayers’ Acceptance of Tax Reform

The United States faces exceptionally large budget deficits over the foreseeable future that threaten the nation's financial stability (Bernanke 2010). A large portion of these deficits is due to the Social Security and Medicare programs. Thus, given the likely need to reform these programs, we utilize a model of rational choice proposed by Margolis (1981, 1984) and conduct an experiment to determine if the accounting information provided about the Social Security system affects taxpayers' acceptance of reform. We find that participants who receive accrual basis financial information are more concerned about the sustainability of the system, and most importantly are willing to accept a greater share of the burden of reforming the Social Security system, than participants receiving cash basis financial information and participants in the control condition. However, through supplemental analyses we also find that if the survival of the Social Security system is placed into question, the willingness to sacrifice begins to decline