On the Treatment of Income Tax Rates in Empirical Analysis of Tax Evasion
In this paper, it is argued that average tax rates exert an influen ce on income tax evasion separate from, and opposite to, that of marginal tax rates. Failure to account for this effect in empirical e vasion models biases the parameter estimate of the marginal rate in a predictable manner. Evidence from an aggregate empirical model of ev asion in the United States indicates that the marginal tax rate is po sitively related to evasion, whereas the average tax rate is negative ly related. Further, exclusion of the average rate from the model doe s in fact bias the parameter estimate of the marginal tax rate. Copyright 1987 by WWZ and Helbing & Lichtenhahn Verlag AG
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Volume (Year): 40 (1987)
Issue (Month): 3 ()
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