Flying under the Radar: Ghosts and the Income Tax

Brian Erard (), Patrick Langetieg, Mark Payne and Alan Plumley

CESifo Economic Studies, vol. 66, issue 3, 185-197

Abstract: The tax compliance literature is primarily focused on taxpayers who fail to accurately report their taxes when they file their returns. In this article, our focus is on ‘ghosts’—individuals who do not even file a tax return. To learn more about this relatively understudied population, we examine a combination of US administrative data and matched Census survey data. Our results indicate that 10–12% of US households with a federal filing requirement fail to file a timely income tax return. Approximately 40% of such households do eventually file a late return. However, the tax gap associated with those who never file is substantial, amounting to an estimated $18–20 billion each year. To gain new insights into what drives individuals to become ghosts, we employ a novel econometric methodology (calibrated probit analysis). We find that the failure to file a timely return is negatively associated with age and income, but positively associated with having a high filing burden and being married. Taxpayers with income near the filing threshold are also less likely to file on time, particularly if they are not eligible for a refundable tax credit. We also find evidence of regional variation in filing compliance.

Keywords: tax evasion; econometric and statistical methods; discrete regression and qualitative choice models (search for similar items in EconPapers)
JEL-codes: C5 C6 H2 H3 (search for similar items in EconPapers)
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/cesifo/ifz021 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:cesifo:v:66:y::i:3:p:185-197.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

CESifo Economic Studies is currently edited by Panu Poutvaara

More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().