EconPapers    
Economics at your fingertips  
 

Tax Evasion on Gratuities

John Anderson () and Örn B. Bodvarsson
Additional contact information
Örn B. Bodvarsson: University of Nebraska-Lincoln and St. Cloud State University

Public Finance Review, 2005, vol. 33, issue 4, 466-487

Abstract: Tax evasion on tips earned by servers is a pervasive problem, one that has received almost no attention in the tax evasion literature. The authors develop a model of joint server and employer tax compliance to derive predictions for how the customer tipping rate, the server’s sales and tax rate, and the expected IRS penalty on employers influence compliance by both parties. They test the model by examining interstate differences in reported hourly pay (wages plus reported tips) during 2001. They use the Occupational Employment Statistics surveys, data on IRS regional audit rates, data from each state’s food and beverage service industry, and information on each state’s minimum wage and tax laws to perform ordinary least squares and two-stage least squares estimation. Empirical results generally provide strong support for a number of the theory’s predictions.

Keywords: tax evasion; tip income; waitpersons and bartenders (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/1091142105277408 (text/html)

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:sae:pubfin:v:33:y:2005:i:4:p:466-487

DOI: 10.1177/1091142105277408

Access Statistics for this article

More articles in Public Finance Review
Bibliographic data for series maintained by SAGE Publications ().

 
Page updated 2022-07-29
Handle: RePEc:sae:pubfin:v:33:y:2005:i:4:p:466-487