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Estimating the "Tax Gap" at the State Level: The Case of Georgia's Personal Income Tax


  • James Alm

    () (Department of Economics, Tulane University)

  • Kyle Borders


Most studies of the so-called "tax gap" (or the amount of taxes that should be collected but are not) focus on national taxes. This study provides several estimates of the "tax gap" for the State of Georgia's personal income tax. The methods use different estimation strategies for each of the three main components (underreporting of income, underpayment of tax liability, and nonfiling of a tax return), and then sum these separate estimates of the tax gap components to yield a range of estimates of the total tax gap in Georgia. The estimated range of the personal income tax gap is \$1.4 billion to \$2.9 billion, for a voluntary compliance rate that ranges from 89.8 percent to 80.8 percent. This study also provides some rough but suggestive estimates of the distributional effects of noncompliance, which indicate that noncompliance as a proportion of income may well be higher in lower income classes.

Suggested Citation

  • James Alm & Kyle Borders, 2014. "Estimating the "Tax Gap" at the State Level: The Case of Georgia's Personal Income Tax," Working Papers 1406, Tulane University, Department of Economics.
  • Handle: RePEc:tul:wpaper:1406

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    References listed on IDEAS

    1. Alm, James & Melnik, Mikhail I., 2010. "Do Ebay Sellers Comply With State Sales Taxes?," National Tax Journal, National Tax Association, vol. 63(2), pages 215-236, June.
    2. Johns, Andrew & Slemrod, Joel, 2010. "The Distribution of Income Tax Noncompliance," National Tax Journal, National Tax Association, vol. 63(3), pages 397-418, September.
    3. Andrea Gebauer & Rüdiger Parsche, 2003. "Evasion of Value-added Taxes in Europe: Ifo Approach to Estimating the Evasion of Value-added Taxes on the Basis of National Accounts Data (NAD)," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 40-44, 02.
    4. Keen, Michael & Smith, Stephen, 2006. "VAT Fraud and Evasion: What Do We Know and What Can Be Done?," National Tax Journal, National Tax Association, vol. 59(4), pages 861-887, December.
    5. Brian Erard & Chih-Chin Ho, 1999. "Searching for Ghosts: Who Are the Nonfilers nd How Much Tax Do They Owe?," Carleton Economic Papers 99-11, Carleton University, Department of Economics, revised Jul 2001.
    6. William F. Fox and Matthew N. Murray, 2003. "Sales Taxation in Global Economy," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0320, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Reckon, 2009. "Study to quantify and analyse the VAT gap in the EU-25 Member States," Taxation Studies 0029, Directorate General Taxation and Customs Union, European Commission.
    8. Brown, Robert E. & Mazur, Mark J., 2003. "IRS’s Comprehensive Approach to Compliance Measurement," National Tax Journal, National Tax Association, vol. 56(3), pages 689-700, September.
    9. repec:ces:ifodic:v:1:y:2003:i:2:p:14567958 is not listed on IDEAS
    10. James Alm, 2012. "Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 54-77, February.
    11. Mazur, Mark J. & Plumley, Alan H., 2007. "Understanding the Tax Gap1," National Tax Journal, National Tax Association, vol. 60(3), pages 569-576, September.
    12. Naomi E. Feldman & Joel Slemrod, 2007. "Estimating tax noncompliance with evidence from unaudited tax returns," Economic Journal, Royal Economic Society, vol. 117(518), pages 327-352, March.
    13. Erard, Brian & Ho, Chih-Chin, 2001. "Searching for ghosts: who are the nonfilers and how much tax do they owe?," Journal of Public Economics, Elsevier, vol. 81(1), pages 25-50, July.
    14. Pissarides, Christopher A. & Weber, Guglielmo, 1989. "An expenditure-based estimate of Britain's black economy," Journal of Public Economics, Elsevier, vol. 39(1), pages 17-32, June.
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    Cited by:

    1. repec:kap:ejlwec:v:44:y:2017:i:1:d:10.1007_s10657-016-9553-0 is not listed on IDEAS
    2. 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).

    More about this item


    tax gap; tax evasion; public budgeting; forecasting;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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