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The underground economy in the U.S.A.: preliminary new evidence on the impact of income tax rates (and other factors) on aggregate tax evasion 1975-2008

PSL Quarterly Review, 01 December 2014, Vol.67(271), pp.451-481 [Peer Reviewed Journal]

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  • Title:
    The underground economy in the U.S.A.: preliminary new evidence on the impact of income tax rates (and other factors) on aggregate tax evasion 1975-2008
  • Author: Richard J. Cebula
  • Found In: PSL Quarterly Review, 01 December 2014, Vol.67(271), pp.451-481 [Peer Reviewed Journal]
  • Subjects: Tax Evasion ; Substitution Effect Income Effect Incentives Disincentives ; Substitution Effect ; Income Effect ; Incentives ; Disincentives ; Political Science ; Economics
  • Language: English
  • Description: This empirical study seeks to identify determinants of the underground economy in the U.S. in the form of aggregate federal personal income tax evasion over the period 1975-2008, with a specific focus upon the impact of higher federal income tax rates on tax evasion. In this study, we use the most recent data available on aggregate personal income tax evasion, data that are derived from the General Currency Ratio Model and measured in the form of the ratio of unreported AGI to reported AGI. Most other studies of federal income tax evasion for the U.S. do not use data this current. It is found that the impact of increases in the federal income tax rate on aggregate personal income tax evasion may, on balance, be ambiguous, possibly suggesting that the income effect is negative and outweighs the positive substitution effect for the representative taxpayer. It is also found that the degree of aggregate personal income tax evasion may be an increasing function of the percentage of...
  • Identifier: ISSN: 2037-3635 ; E-ISSN: 2037-3643

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