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Do Government-Spending-Induced Deficits Lower Tax Compliance?

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  • Cebula, Richard
  • Coombs, Christopher

Abstract

This study empirically investigates the deficit/tax-compliance hypothesis that higher federal budget deficits resulting from increased government spending lead to decreased federal personal income tax compliance in the U.S. The study period runs from 1960-2001 and adopts annual data. After allowing for a variety of factors that have been found previously to influence tax compliance/evasion, it is found that income tax evasion is an increasing function of budget deficits resulting from federal government spending increases.

Suggested Citation

  • Cebula, Richard & Coombs, Christopher, 2008. "Do Government-Spending-Induced Deficits Lower Tax Compliance?," MPRA Paper 50121, University Library of Munich, Germany, revised 18 Apr 2009.
    • Handle: RePEc:pra:mprapa:50121
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    References listed on IDEAS

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    More about this item

    Keywords

    personal income tax compliance; tax evasion; budget deficits; IRS audit rates; IRS penalties; unemployment rate;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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