Estimating the 'Tax Gap' at the State Level: The Case of Georgia's Personal Income Tax

19 Pages Posted: 5 Dec 2014

See all articles by James Alm

James Alm

Tulane University

Kyle Borders

affiliation not provided to SSRN

Date Written: Winter 2014

Abstract

Most studies of the so‐called “tax gap” (or the amount of taxes that should be collected but are not) focus on national taxes. This study provides several estimates of the “tax gap” for the State of Georgia's personal income tax. The methods use different estimation strategies for each of the three main components (underreporting of income, underpayment of tax liability, and nonfiling of a tax return), and then sum these separate estimates of the tax gap components to yield a range of estimates of the total tax gap in Georgia. The estimated range of the personal income tax gap is $1.4 billion to $2.9 billion, for a voluntary compliance rate that ranges from 89.8 percent to 80.8 percent. This study also provides some rough but suggestive estimates of the distributional effects of noncompliance, which indicate that noncompliance as a proportion of income may well, be higher in lower income classes.

Suggested Citation

Alm, James and Borders, Kyle, Estimating the 'Tax Gap' at the State Level: The Case of Georgia's Personal Income Tax (Winter 2014). Public Budgeting & Finance, Vol. 34, Issue 4, pp. 61-79, 2014, Available at SSRN: https://ssrn.com/abstract=2534196 or http://dx.doi.org/10.1111/pbaf.12050

James Alm (Contact Author)

Tulane University ( email )

United States
5048628344 (Phone)

Kyle Borders

affiliation not provided to SSRN

No Address Available

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