Cheating Ourselves: The Economics of Tax Evasion
AbstractNo government can announce a tax system and then rely on taxpayers' sense of duty to remit what is owed. Some dutiful people will undoubtedly pay what they owe, but many others will not. Over time the ranks of the dutiful will shrink, as they see how they are being taken advantage of by the others. Thus, paying taxes must be made a legal responsibility of citizens, with penalties attendant on noncompliance. But even in the face of those penalties, substantial tax evasion exists. Tax evasion is widespread, always has been, and probably always will be. This essay reviews what is known about the magnitude, nature, and determinants of tax evasion, with an emphasis on the U.S. income tax. It then places this information into a conceptual context, examining various models and theories, and considers policy implications.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Perspectives.
Volume (Year): 21 (2007)
Issue (Month): 1 (Winter)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lars P. Feld & Bruno S. Frey, .
"Trust Breeds Trust: How Taxpayers are Treated,"
IEW - Working Papers
098, Institute for Empirical Research in Economics - University of Zurich.
- Dhami, Sanjit & al-Nowaihi, Ali, 2007.
"Why do people pay taxes? Prospect theory versus expected utility theory,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 64(1), pages 171-192, September.
- Sanjit Dhami & Ali al-Nowaihi, 2005. "Why Do People Pay Taxes? Prospect Theory Versus Expected Utility Theory," Discussion Papers in Economics 05/23, Department of Economics, University of Leicester, revised Aug 2006.
- Joel Slemrod & Marsha Blumenthal & Charles Christian, 2001.
"Taxpayer response to an increased probability of audit: Evidence from a controlled experiment in minnesota,"
Natural Field Experiments
00332, The Field Experiments Website.
- Slemrod, Joel & Blumenthal, Marsha & Christian, Charles, 2001. "Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota," Journal of Public Economics, Elsevier, vol. 79(3), pages 455-483, March.
- Yitzhaki, Shlomo, 1974. "Income tax evasion: A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 201-202, May.
- Joel Slemrod & Shlomo Yitzhaki, 1985.
"The Optimal Size of a Tax Collection Agency,"
NBER Working Papers
1759, National Bureau of Economic Research, Inc.
- Benno Torgler, 2004.
"Moral suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland,"
Economics of Governance,
Springer, vol. 5(3), pages 235-253, November.
- Benno Torgler, 2004. "Moral Suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland," CREMA Working Paper Series 2004-01, Center for Research in Economics, Management and the Arts (CREMA).
- Blumenthal, Marsha & Christian, Charles W. & Slemrod, Joel, 2001. "Do Normative Appeals Affect Tax Compliance? Evidence from a Controlled Experiment in Minnesota," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 125-38, March.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Klepper, Steven & Nagin, Daniel, 1989. "The Anatomy of Tax Evasion," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 1-24, Spring.
- Clotfelter, Charles T, 1983. "Tax Evasion and Tax Rates: An Analysis of Individual Returns," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 363-73, August.
- Joel Slemrod & Jon Bakija, 2004. "Taxing Ourselves, 3rd Edition: A Citizen's Guide to the Debate over Taxes," MIT Press Books, The MIT Press, edition 3, volume 1, number 026269302x, December.
- Alm, James & Jackson, Betty & McKee, Michael J., 1992. "Estimating the Determinants of Taxpayer Compliance with Experimental Data," National Tax Journal, National Tax Association, vol. 45(1), pages 107-14, March.
- Slemrod, Joel, 2004.
"The Economics of Corporate Tax Selfishness,"
National Tax Journal,
National Tax Association, vol. 57(4), pages 877-99, December.
- Kong-Pin & C.Y. Cyrus Chu, 2005. "Internal Control versus External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 151-164, Spring.
- Baldry, Jonathan C, 1987. "Income Tax Evasion and the Tax Schedule: Some Experimental Results," Public Finance = Finances publiques, , vol. 42(3), pages 357-83.
- Frey, Bruno S, 1997. "A Constitution for Knaves Crowds Out Civic Virtues," Economic Journal, Royal Economic Society, vol. 107(443), pages 1043-53, July.
- Falkinger, Josef, 1995. "Tax evasion, consumption of public goods and fairness," Journal of Economic Psychology, Elsevier, vol. 16(1), pages 63-72, March.
- Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Jonathan S. Feinstein, 1991. "An Econometric Analysis of Income Tax Evasion and its Detection," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 14-35, Spring.
- Sung Won Kang & Hugh Rockoff, 2006. "Capitalizing Patriotism: The Liberty Loans of World War I," NBER Working Papers 11919, National Bureau of Economic Research, Inc.
- Gruber, Jon & Saez, Emmanuel, 2002.
"The elasticity of taxable income: evidence and implications,"
Journal of Public Economics,
Elsevier, vol. 84(1), pages 1-32, April.
- Jon Gruber & Emmanuel Saez, 2000. "The Elasticity of Taxable Income: Evidence and Implications," NBER Working Papers 7512, National Bureau of Economic Research, Inc.
- Keith J. Crocker & Joel Slemrod, 2004.
"Corporate Tax Evasion with Agency Costs,"
NBER Working Papers
10690, National Bureau of Economic Research, Inc.
- Benno Torgler, 2003. "Tax Morale, Rule-Governed Behaviour and Trust," Constitutional Political Economy, Springer, vol. 14(2), pages 119-140, June.
- Jan Hanousek & Filip Palda, 2002.
"Quality of Government Services and the Civic Duty to Pay Taxes in the Czech and Slovak Republics, and other Transition Countries,"
- Jan Hanousek & Filip Palda, 2004. "Quality of Government Services and the Civic Duty to Pay Taxes in the Czech and Slovak Republics, and other Transition Countries," Kyklos, Wiley Blackwell, vol. 57(2), pages 237-252, 05.
- Kong-Pin Chen & C.Y. Cyrus Chu, 2005. "Internal Control vs. External Manipulation: A Model of Corporate Income Tax Evasion," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 151-164, Winter.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Roger Gordon & Wei Li, 2005.
"Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation,"
NBER Working Papers
11267, National Bureau of Economic Research, Inc.
- Gordon, Roger & Li, Wei, 2009. "Tax structures in developing countries: Many puzzles and a possible explanation," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 855-866, August.
- Baldry, J C, 1984. "The Enforcement of Income Tax Laws: Efficiency Implications," The Economic Record, The Economic Society of Australia, vol. 60(169), pages 156-59, June.
- Naomi E. Feldman & Joel Slemrod, 2007. "Estimating tax noncompliance with evidence from unaudited tax returns," Economic Journal, Royal Economic Society, vol. 117(518), pages 327-352, 03.
- Sandmo, Agnar, 2005. "The Theory of Tax Evasion: A Retrospective View," National Tax Journal, National Tax Association, vol. 58(4), pages 643-63, December.
- Andreoni, J. & Erard, B. & Feinstein, J., 1996.
9610, Wisconsin Madison - Social Systems.
- Wojciech Kopczuk & Joel Slemrod, 2006. "Putting Firms into Optimal Tax Theory," American Economic Review, American Economic Association, vol. 96(2), pages 130-134, May.
- Mayshar, Joram, 1991. " Taxation with Costly Administration," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 75-88.
- Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
- Joel Slemrod & Shlomo Yitzhaki, 1996. "The Costs of Taxation and the Marginal Efficiency Cost of Funds," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 172-198, March.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.