Do Government-Spending-Induced Deficits Lower Tax Compliance?

Richard Cebula () and Christopher Coombs

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: personal income tax compliance; tax evasion; budget deficits; IRS audit rates; IRS penalties; unemployment rate (search for similar items in EconPapers)
JEL-codes: H26 H31 H41 H62 (search for similar items in EconPapers)
Date: 2008-11-10, Revised 2009-04-18
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Published in Tax Notes 9.125(2009): pp. 1007-1012

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