IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v30y2002i5p456-476.html
   My bibliography  Save this article

Risk-Averse Taxpayers and the Allocation of Tax Enforcement Effort: Law Enforcement or Leviathan? Some Empirical Evidence

Author

Listed:
  • Roger D. Congleton

    (George Mason University)

Abstract

Agencies charged with collecting taxes and enforcing the tax code generally use information provided by taxpayers to decide whether to subject individual returns to a variety of review procedures. One consequence of such conditional screening is the creation of incentives for strategic income reporting by individuals who wish to avoid the inconvenience and penalties associated with audits. Because taxpayers differ with respect to risk aversion, individuals in identical fiscal circumstances tend to report different income levels and pay different taxes. In turn, a tax agency may allocate its enforcement effort in a manner that systematically takes account of differences in taxpayer risk aversion. Three models are developed and tested in this article. Empirical evidence suggests that risk aversion affects both taxpayer behavior and the allocation of audit efforts by the Internal Revenue Service of the United States, although not in the manner predicted by the Leviathan model.

Suggested Citation

  • Roger D. Congleton, 2002. "Risk-Averse Taxpayers and the Allocation of Tax Enforcement Effort: Law Enforcement or Leviathan? Some Empirical Evidence," Public Finance Review, , vol. 30(5), pages 456-476, September.
    • Handle: RePEc:sae:pubfin:v:30:y:2002:i:5:p:456-476
    DOI: 10.1177/109114210203000508
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114210203000508
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114210203000508?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, January.
    2. Hettich,Walter & Winer,Stanley L., 2005. "Democratic Choice and Taxation," Cambridge Books, Cambridge University Press, number 9780521021807, January.
    3. Congleton, Roger D, 2001. "Rational Ignorance, Rational Voter Expectations, and Public Policy: A Discrete Informational Foundation for Fiscal Illusion," Public Choice, Springer, vol. 107(1-2), pages 35-64, April.
    4. Buchanan,James M. & Congleton,Roger D., 2006. "Politics by Principle, Not Interest," Cambridge Books, Cambridge University Press, number 9780521031325, January.
    5. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
    6. Orazem, Peter F & Mattila, J Peter, 1991. "Human Capital, Uncertain Wage Distributions, and Occupational and Educational Choices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 103-122, February.
    7. Mattila, J. Peter & Orazem, Peter, 1991. "Human Capital, Uncertain Wage Distributions, and Educational and Occupational Choices," Staff General Research Papers Archive 10841, Iowa State University, Department of Economics.
    8. Caplan, Bryan, 2001. "Rational Irrationality and the Microfoundations of Political Failure," Public Choice, Springer, vol. 107(3-4), pages 311-331, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alvaro Forteza & Cecilia Noboa, 2021. "Tolerance of tax evasion," International Economics and Economic Policy, Springer, vol. 18(4), pages 767-786, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stanley L. Winer, 2016. "The Political Economy of Taxation: Power, Structure, Redistribution," Carleton Economic Papers 16-15, Carleton University, Department of Economics.
    2. Stanley L. Winer & Walter Hettich, 2002. "The Political Economy of Taxation: Positive and Normative Analysis when Collective Choice Matters," Carleton Economic Papers 02-11, Carleton University, Department of Economics, revised 2004.
    3. Richard E. Wagner, 2012. "Deficits, Debt, and Democracy," Books, Edward Elgar Publishing, number 14477.
    4. Daniel Sutter & Lee Coppock, 2003. "The Tax Man Cometh: Constitutional Principles for Tax Enforcement," Constitutional Political Economy, Springer, vol. 14(2), pages 107-118, June.
    5. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September.
    6. Randall Holcombe, 2005. "Government growth in the twenty-first century," Public Choice, Springer, vol. 124(1), pages 95-114, July.
    7. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
    8. Randall G. Holcombe, 2020. "James M. Buchanan’s constitutional project: past and future," Public Choice, Springer, vol. 183(3), pages 371-387, June.
    9. Stanley L. Winer & George Tridimas & Walter Hettich, 2007. "Social Welfare and Collective Goods Coercion in Public Economics," Carleton Economic Papers 07-03, Carleton University, Department of Economics.
    10. Roger D. Congleton, 2020. "Governance by true believers: supreme duties with and without totalitarianism," Constitutional Political Economy, Springer, vol. 31(1), pages 111-141, March.
    11. Roger Congleton & Andreas Kyriacou & Jordi Bacaria, 2003. "A Theory of Menu Federalism: Decentralization by Political Agreement," Constitutional Political Economy, Springer, vol. 14(3), pages 167-190, September.
    12. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624.
    13. Bazart, C., 2001. "La complexité du processus institutionnel de décision fiscale : causes et conséquences," Cahiers du CREDEN (CREDEN Working Papers) 01.06.23, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
    14. repec:elg:eechap:15325_13 is not listed on IDEAS
    15. Roger Congleton, 2014. "The contractarian constitutional political economy of James Buchanan," Constitutional Political Economy, Springer, vol. 25(1), pages 39-67, March.
    16. Byung Park, 2010. "What matters to managerial knowledge acquisition in international joint ventures? High knowledge acquirers versus low knowledge acquirers," Asia Pacific Journal of Management, Springer, vol. 27(1), pages 55-79, March.
    17. Richard M. Bird & Jorge Martinez-Vazquez & Benno Torgler, 2014. "Societal Institutions and Tax Effort in Developing Countries," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 301-351, May.
    18. Silvestri, Paolo, 2015. "Anthropology of Freedom and Tax Justice: Between Exchange and Gift. Thoughts for an Interdisciplinary Research Agenda," CESMEP Working Papers 201503, University of Turin.
    19. Paola Profeta & Simona Scabrosetti, 2010. "The Political Economy of Taxation," Books, Edward Elgar Publishing, number 13258.
    20. Sjögren, Anna, 1998. "The Effects of Redistribution on Occupational Choice and Intergenerational Mobility: Does Wage Equality Nail the Cobbler to His Last?," SSE/EFI Working Paper Series in Economics and Finance 239, Stockholm School of Economics.
    21. Wohlgemuth, Darin Ray, 1997. "Individual and aggregate demand for higher education: the role of strategic scholarships," ISU General Staff Papers 1997010108000012571, Iowa State University, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:30:y:2002:i:5:p:456-476. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.