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America’s Underground Economy: Measuring the Size, Growth and Determinants of Income Tax Evasion in the U.S

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  • Feige, Edgar L.
  • Cebula, Richard

Abstract

Abstract This study empirically investigates the extent of non compliance with the tax code and the determinants of federal income tax evasion in the U.S. Employing the most recent data we find that 18-19% of total reportable income is not properly reported to the IRS, giving rise to a “tax gap” approaching $500 billion dollars. Three time periods are studied, 1960-2008, 1970-2008, and 1980-2008. It is found across study periods that income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, public dissatisfaction with government, and per capita real GDP (adopted as a measure of income), and a decreasing function of the Tax Reform Act of 1986 (during its first two years of being implemented). Modest evidence of a negative impact of IRS audit rates on tax evasion is also detected.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29672.

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Date of creation: Jan 2011
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Handle: RePEc:pra:mprapa:29672

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Related research

Keywords: Underground economy; unreported economy; tax evasion; tax gap; non compliance; Federal income tax;

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References

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  1. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
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  7. Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-36.
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Citations

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Cited by:
  1. Michael Pickhardt & Jordi Sardà, . "Cash, Hoarding and the Underground Economy," Working Papers 201282, Institute of Spatial and Housing Economics, Munster Universitary.
  2. Levaggi, Rosella & Menoncin, Francesco, 2013. "Optimal dynamic tax evasion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2157-2167.

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  1. Black market in Wikipedia English ne '')
  2. Tax evasion in Wikipedia English ne '')
  3. 地下経済 in Wikipedia Japanese ne '')
  4. Tax evasion in the United States in Wikipedia English ne '')
  5. Taxation in the United States in Wikipedia English ne '')

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