Do Budget Deficits Reduce Household Taxpayer Compliance? Preliminary Evidence Using the Feige Data

Cebula, Richard and Toma, Michael (2004): Do Budget Deficits Reduce Household Taxpayer Compliance? Preliminary Evidence Using the Feige Data. Published in: Journal of Academy of Business and Economics , Vol. 7, No. 1 (31 March 2007): pp. 54-60.

Abstract

This study investigates the hypothesis that higher federal budget deficits act to increase the degree of federal personal income tax evasion in the U.S. Using annual data on aggregate personal income tax evasion for the period 1961-1997, 1997 being the most recent year for which all of the needed data are currently available, and allowing for such factors as income tax rates, IRS tax return audit rates, the Vietnam War, and the Watergate scandal, it is found that income tax evasion is an increasing function of the budget deficit. Important policy implications of this finding are provided in the Conclusion

• Item Type: MPRA Paper
• Language: English
• Keywords: underground economy; tax evasion; budget deficit
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy Formulation and Implementation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; H - Public Economics > H6 - National Budget, Deficit, and Debt > H62 - Deficit ; Surplus; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

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