Munich Personal RePEc Archive

Do Government-Spending-Induced Deficits Lower Tax Compliance?

Cebula, Richard and Coombs, Christopher (2008): Do Government-Spending-Induced Deficits Lower Tax Compliance? Published in: Tax Notes , Vol. 125, No. 9 (30 November 2009): pp. 1007-1012.

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This study empirically investigates the deficit/tax-compliance hypothesis that higher federal budget deficits resulting from increased government spending lead to decreased federal personal income tax compliance in the U.S. The study period runs from 1960-2001 and adopts annual data. After allowing for a variety of factors that have been found previously to influence tax compliance/evasion, it is found that income tax evasion is an increasing function of budget deficits resulting from federal government spending increases.

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