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Cheating Ourselves: The Economics of Tax Evasion

  • Joel Slemrod

No 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.

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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 21 (2007)
Issue (Month): 1 (Winter)
Pages: 25-48

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Handle: RePEc:aea:jecper:v:21:y:2007:i:1:p:25-48
Note: DOI: 10.1257/jep.21.1.25
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  19. 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.
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