Thanks for that link, Fester.
I've certainly never seen this posed as "a dilemma for progressives" before (clearly that's just me, since you have): the paper seems to be about good old People Like Us syndrome.
(In general, people tend to favour People Like Us: they help out PLU, appoint PLU to jobs - which is why men appoint men - and so on.)
IIUC on a quick read, the authors are discussing willingness to pay taxes in the context of ethnicity and of benefitting PLU. They note that people have multiple self-identities, and this paper studies citizenship, religion, language and ethnicity (so not class, gender, level of education, etc).
IIUC they say it's a struggle to separate out what is the effect of race, and what of racism. Ie people are less likely to pay taxes if they perceive themselves less likely to benefit from them; so where state spending is seen as benefitting one ethnic group over another, the disadvantaged group is less keen to pay taxes.
They also describe a number of examples where highly ethnically diverse countries such as India are very willing to pay taxes.
Mostly the paper attempts to be descriptive.
Its conclusion attempts to recommend:
"It suggests that policy makers stress similarities among taxpayers and their common needs in order to improve voluntary tax compliance, e.g., we all use the roads, all our children need to be educated, we all face concerns around retirement, unemployment can happen to anyone. The common identity theory (Gaertner et al. 1993, and Gaertner 2000) in psychology suggests that if members of different groups can conceive of themselves as a common group, they will have a lower level of intergroup biases. They will think of themselves as having a common interest, facing some common goal, and sharing a common fate. Subsequently, the shared collective identity can help reduce social loafing.
"Moreover, the empirical findings of this paper highlight the considerable promise of nourishing citizenship identity. They suggest that tax authorities consider investing in motivational capital to complement conventional tax enforcement strategies of deterrence and material incentives. Since taxpayers who assume a salient citizen identity have stronger intrinsic motivation to comply with tax laws, authorities may promote the spirit of citizenship – a consensual understanding of shared goals and common values. This implication is especially helpful for ethnically fragmented countries where a strong sense of citizenship is related to increased tax morale."