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Do Budget Deficits Reduce Household Taxpayer Compliance? Preliminary Evidence Using the Feige Data

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  • Cebula, Richard
  • Toma, Michael

Abstract

This study investigates the hypothesis that higher federal budget deficits act to increase the degree of federal personal income tax evasion in the U.S. Using annual data on aggregate personal income tax evasion for the period 1961-1997, 1997 being the most recent year for which all of the needed data are currently available, and allowing for such factors as income tax rates, IRS tax return audit rates, the Vietnam War, and the Watergate scandal, it is found that income tax evasion is an increasing function of the budget deficit. Important policy implications of this finding are provided in the Conclusion

Suggested Citation

  • Cebula, Richard & Toma, Michael, 2004. "Do Budget Deficits Reduce Household Taxpayer Compliance? Preliminary Evidence Using the Feige Data," MPRA Paper 56739, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56739
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    References listed on IDEAS

    as
    1. Richard J. Cebula, 2001. "Impact of income-detection technology and other factors on aggregate income tax evasion:the case of the United States," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 401-415.
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    5. Cebula, Richard, 1996. "An Empirical Analysis of the Impact of Government Tax and Auditing Policies on the Size of the Underground Economy: The Case of the United States, 1973-94," MPRA Paper 49810, University Library of Munich, Germany.
    6. Erard, Brian & Feinstein, Jonathan S, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 70-89.
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    8. de Juan, Ana & Lasheras, Miguel A & Mayo, Rafaela, 1994. "Voluntary Tax Compliant Behavior of Spanish Income Tax Payers," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 90-105.
    9. Brian Erard & Jonathan Feinstein, 1994. "The Role of Moral Sentiments and Audit Perceptions in Tax Compliance," Carleton Industrial Organization Research Unit (CIORU) 94-03, Carleton University, Department of Economics.
    10. Feige, Edgar L, 1994. "The Underground Economy and the Currency Enigma," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 119-136.
    11. Baldry, Jonathan C, 1987. "Income Tax Evasion and the Tax Schedule: Some Experimental Results," Public Finance = Finances publiques, , vol. 42(3), pages 357-383.
    12. Cebula, Richard, 1990. "A Note on Federal Budget Deficits and the Term Structure of Real Interest Rates in the United States," MPRA Paper 50238, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    underground economy; tax evasion; budget deficit;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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