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Taxpayer response to an increased probability of audit: evidence from a controlled experiment in Minnesota

  • Slemrod, Joel
  • Blumenthal, Marsha
  • Christian, Charles

In 1995 a group of 1724 randomly selected Minnesota taxpayers was informed by letter that the returns they were about to file would be 'closely examined'. Compared to a control group that did not receive this letter, low and middle-income taxpayers in the treatment group on average increased tax payments compared to the previous year, which we interpret as indicating the presence of noncompliance. The effect was much stronger for those with more opportunity to evade; in fact, the difference in differences is not statistically significant for those who do not have self-employment or farm income, and do not pay estimated tax. Surprisingly, however, the reported tax liability of the high income treatment group fell sharply relative to the control group.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 79 (2001)
Issue (Month): 3 (March)
Pages: 455-483

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Handle: RePEc:eee:pubeco:v:79:y:2001:i:3:p:455-483
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Cremer, Helmuth & Gahvari, Firouz, 1994. " Tax Evasion, Concealment and the Optimal Linear Income Tax," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 219-39.
  2. James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring.
  3. 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.
  4. Gary Burtless, 1995. "The Case for Randomized Field Trials in Economic and Policy Research," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 63-84, Spring.
  5. Slemrod, Joel, et al, 1997. "April 15 Syndrome," Economic Inquiry, Western Economic Association International, vol. 35(4), pages 695-709, October.
  6. 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.
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