Working Paper: NBER ID: w24323
Authors: Julie Berry Cullen; Nicholas Turner; Ebonya L. Washington
Abstract: We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes. We use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically. Next, we move to the county level, and measure tax behavior as turnover elections push voters in partisan counties into and out of alignment with the party of the president. We provide three types of evidence that alignment reduces evasion. As a county moves into alignment we find 1) taxpayers report more easily-evaded forms of income; 2) suspect EITC claims decrease; and 3) audits triggered and audits found to owe additional tax decrease. Our results provide real-world evidence that a positive outlook on government lowers tax evasion.
Keywords: political alignment; tax evasion; government attitudes; EITC claims; audit rates
JEL Codes: D72; H24; H26; H3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political alignment (D72) | tax evasion (H26) |
| political alignment (D72) | EITC claims (H26) |
| political alignment (D72) | audit rates (M42) |
| political alignment (D72) | tax compliance (H26) |