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Socio-economic Diversity, Social Capital, and Tax Filing Compliance in the United States

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Abstract

In this paper we present a rare empirical study on the determinants of tax filing compliance in the United States using county and state level data from 2000 to 2006. As well as including explanatory variables identified in the rational compliance framework such as audit and penalty rates, we examine the role of social capital on tax compliance. In particular, we test whether county level heterogeneity in income, language, race and religion can explain variation in filing rates. While several issues are not yet addressed in this preliminary analysis (such as censoring, endogeneity between audit and non-filing rates, and people’s self-selection to county), our preliminary findings are that non-filing rates are falling in the enforcement rate, rising in the penalty rate for income reporting noncompliance, and rising in home-ownership and unemployment rates. Regarding heterogeneity, non-filing rates do not seem to covary with household income inequality or home language fragmentation, but increase with racial fragmentation.

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  • James Alm & Jeremy Clark & Kara Leibel, 2011. "Socio-economic Diversity, Social Capital, and Tax Filing Compliance in the United States," Working Papers in Economics 11/35, University of Canterbury, Department of Economics and Finance.
  • Handle: RePEc:cbt:econwp:11/35
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    File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1135.pdf
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    More about this item

    Keywords

    tax filing compliance; social capital; heterogeneity;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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