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Redistribution through the Income Tax: The Vertical and Horizontal Effects of Noncompliance and Tax Evasion

Author

Listed:
  • John A. Bishop

    (East Carolina University)

  • John P. Formby

    (University of Alabama)

  • Peter Lambert

    (University of York)

Abstract

This article uses the unique Taxpayer Compliance Measurement Program (TCMP) micro data to study the equity effects of noncompliance. The authors access 4 years of TCMP data: 1979, 1982, 1985, and 1988. The TCMP data allows the authors to observe income and taxes before and after a tax audit. To generate a range of scalar estimates of the redistributive impact of more complete compliance, the authors employ the family of extended Gini and concentration coefficients. They find that the vertical equity effects of noncompliance are very small or negative; however, there is a considerable amount of horizontal inequity generated by noncompliance, and in this sense more complete auditing of tax returns could improve the fairness of the tax system.

Suggested Citation

  • John A. Bishop & John P. Formby & Peter Lambert, 2000. "Redistribution through the Income Tax: The Vertical and Horizontal Effects of Noncompliance and Tax Evasion," Public Finance Review, , vol. 28(4), pages 335-350, July.
    • Handle: RePEc:sae:pubfin:v:28:y:2000:i:4:p:335-350
    DOI: 10.1177/109114210002800403
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    References listed on IDEAS

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    1. Yitzhaki, Shlomo, 1983. "On an Extension of the Gini Inequality Index," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 617-628, October.
    2. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
    3. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, vol. 104(423), pages 262-270, March.
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    Cited by:

    1. John A. Bishop & Jonathan M. Lee & Lester A. Zeager, 2017. "Incorporating spatial price adjustments in U.S. public policy analysis," Working Papers 438, ECINEQ, Society for the Study of Economic Inequality.
    2. Annette Alstadsæter & Niels Johannesen & Gabriel Zucman, 2019. "Tax Evasion and Inequality," American Economic Review, American Economic Association, vol. 109(6), pages 2073-2103, June.
    3. Higgins, Sean & Lustig, Nora, 2016. "Can a poverty-reducing and progressive tax and transfer system hurt the poor?," Journal of Development Economics, Elsevier, vol. 122(C), pages 63-75.
    4. Sara Torregrosa, 2015. "Bypassing progressive taxation: fraud and base erosion in the Spanish income tax (1970-2001)," Working Papers 2015/31, Institut d'Economia de Barcelona (IEB).
    5. Sean Higgins & Nora Lustig, 2015. "Can Poverty-Reducing and Progressive Tax and Transfer System Hurt the Poor?," Commitment to Equity (CEQ) Working Paper Series 1333, Tulane University, Department of Economics.
    6. Bishop John A. & Lee Jonathan M. & Zeager Lester A., 2018. "U.S. Income Comparisons with Regional Price Parity Adjustments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(4), pages 1-17, October.
    7. Mahieddine Adnan Ghecham, 2017. "The Impact of Informal Sector on Income Distribution: Could Concentration of Income be Explained by the Size of Informal Sector?," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 594-600.
    8. Erlend Bø & Peter Lambert & Thor Thoresen, 2012. "Horizontal inequity under a dual income tax system: principles and measurement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(5), pages 625-640, October.

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