Strategic Tax Planning for State Tax Amnesties
Tax amnesty programs have exploded in popularity among cash-strapped states since the beginning of the Great Recession. Though many scholars have been interested in the long-term tax compliance effects after amnesty programs, this article is the first to consider short-run compliance effects just prior to a known amnestyâ€”a moral hazard effect leading to strategic delinquencies. Evidence of this is detected from year-over-year tax revenue change in quarters just prior to an amnesty program. Regression analysis on pre-amnesty periods for state tax amnesty programs between 1982 and 2011 indicates that states experience higher pre-amnesty revenues when recent delinquents are excluded from amnesty participation. The point estimates from ordinary least squares (OLS) indicated that about 4.3 to 6.4 percent of an average amnestyâ€™s recovery came from strategically delayed payments, whereas IV/2SLS put the range at 12.9 to 16.5 percent.
Volume (Year): 41 (2013)
Issue (Month): 3 (May)
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