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Third‐Party Tax Administration: The Case of Low‐ and Moderate‐Income Households

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  • Michael S. Barr
  • Jane K. Dokko

Abstract

Using a unique household‐level data set, this article investigates the tax‐filing experiences and refund behavior of low‐ and moderate‐income (LMI) households. We document households’ tax‐filing behavior, attitudes about the withholding system, use of tax refunds to consume and save, and the mechanisms by which households would prefer to receive their income. We also document the prevalence of the use of tax‐preparation services and the receipt of tax refunds and refund‐anticipation loans. Finally, we argue that there may be a role for tax administration to enable LMI households to make welfare‐improving financial decisions.

Suggested Citation

  • Michael S. Barr & Jane K. Dokko, 2008. "Third‐Party Tax Administration: The Case of Low‐ and Moderate‐Income Households," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 5(4), pages 963-981, December.
    • Handle: RePEc:wly:empleg:v:5:y:2008:i:4:p:963-981
    DOI: 10.1111/j.1740-1461.2008.00147.x
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    References listed on IDEAS

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    1. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
    2. Esther Duflo & William Gale & Jeffrey Liebman & Peter Orszag & Emmanuel Saez, 2006. "Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1311-1346.
    3. Kopczuk, Wojciech & Pop-Eleches, Cristian, 2007. "Electronic filing, tax preparers and participation in the Earned Income Tax Credit," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1351-1367, August.
    4. Shapiro, Matthew D & Slemrod, Joel, 1995. "Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding," American Economic Review, American Economic Association, vol. 85(1), pages 274-283, March.
    5. repec:ucp:bkecon:9780226264141 is not listed on IDEAS
    6. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
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