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Redistribution Through the Income Tax: The Vertical and Horizontal Effects of Noncompliance and Tax Evasion

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  • John A Bishop
  • John P Formby
  • Peter Lambert

Abstract

This paper uses the unique Taxpayer Compliance Measurement Program (TCMP) micro data to study the equity effects of noncompliance. We access four years of TCMP data, 1979,1982,1985, and 1988. The TCMP data allows us to observe income and taxes before and after a tax audit. In order to generate a range of scalar estimates of the redistributive impact of more complete compliance we employ the family of extended Gini and concentration coefficients. We find that the vertical equity effects are very small of negative; however, there is a considerable amount of horizontal inequity generated by noncompliance and in this sense more complete auditing of tax returns could improve the fairness of the tax system

Suggested Citation

  • John A Bishop & John P Formby & Peter Lambert, "undated". "Redistribution Through the Income Tax: The Vertical and Horizontal Effects of Noncompliance and Tax Evasion," Discussion Papers 99/13, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:99/13
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    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/1999/9913.pdf
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    1. Aronson, J Richard & Johnson, Paul & Lambert, Peter J, 1994. "Redistributive Effects and Unequal Income Tax Treatment," Economic Journal, Royal Economic Society, vol. 104(423), pages 262-270, March.
    2. Duclos, Jean-Yves, 1993. "Progressivity, Redistribution, and Equity, with Application to the British Tax and Benefit System," Public Finance = Finances publiques, , vol. 48(3), pages 350-365.
    3. Plotnick, Robert, 1981. "A Measure of Horizontal Inequity," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 283-288, May.
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