Monday, April 10, 2017
Julie Berry Cullen (UC-San Diego), presents Political Alignment and Tax Evasion at NYU today as part of its Tax Policy Colloquium Series hosted by Daniel Shaviro and Rosanne Altshuler:
We explore whether the decision to evade federal personal income taxes depends on the taxpayer’s level of approval of government. We first demonstrate using survey data the positive association between political alignment with the current president and the respondent’s trust in the administration and support for government taxation and spending. We then show using IRS tax return data and county-level fixed effects regressions that the larger the typical share of county residents who vote for the president’s party the smaller the tax gap across a variety of tax gap measures. Responses are concentrated in income components that are more likely to be invisible to the government, such as small business income. Our results provide realworld evidence that a positive outlook on government lowers tax evasion.