Tax Evasion in the Presence of Negative Income Tax Rates

18 Pages Posted: 11 Oct 2017

See all articles by David Joulfaian

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

Mark Rider

Georgia State University - Department of Economics

Date Written: December 1, 1996

Abstract

This paper examines the impact of marginal tax rates, which incorporate the earned income tax credit (EITC) as it existed in 1988, on the reporting of income by low-income taxpayers. We generally find that misreported income is not affected by tax rates, except for proprietors. Negative marginal tax rates, which occur in the phase-in range of the EITC, do not appear to affect the amount of income overreported, irrespective of the source of income. Furthermore, the amount of income underreported does not appear to be affected by the relatively high marginal tax rates which occur in the phase-out range, except for proprietors. Even in the case of proprietors, the effect on the understatement of income is modest.

Keywords: Negative Income Tax, Tax Evasion

JEL Classification: H24, H26, H31

Suggested Citation

Joulfaian, David and Rider, Mark, Tax Evasion in the Presence of Negative Income Tax Rates (December 1, 1996). National Tax Journal, Vol. 49, No. 4, 1996. Available at SSRN: https://ssrn.com/abstract=1345280

David Joulfaian (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

Mark Rider

Georgia State University - Department of Economics ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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