Working Paper: NBER ID: w24153
Authors: Ugo Troiano
Abstract: Improving the efficiency of tax collection is important for development and fairness purposes. I study the Audit Exchange Information Agreements, which are agreements between the states and the U.S. federal government to exchange information about income tax audit plans and techniques, signed between the 1950s and the 1970s. Adopting a difference-in-differences identification strategy, I show that the program increased state income tax revenues by about 15 percent. I show that mobility and the reported income do not appear to react to the policy, suggesting that the effects may be linked to higher quality auditing. The effects are stronger in places where there are more civic and social organizations, suggesting that tax compliance is higher when there is more cooperative gathering.
Keywords: Tax Enforcement; Intergovernmental Cooperation; Audit Exchange Agreements
JEL Codes: H21; H26; H77; N92
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Signing of audit exchange information agreements (H26) | State income tax revenues (H71) |
| Audit exchange information agreements (M42) | Reduced enforcement costs (K40) |
| Reduced enforcement costs (K40) | Increased tax compliance (H26) |
| Audit exchange information agreements (M42) | Tax compliance (H26) |
| Civic and social organizations (L39) | Tax compliance (H26) |
| Audit exchange information agreements (M42) | Improved auditing quality (M42) |