Do Sin Tax Hikes Spur Cheating in Interpersonal Exchange?

51 Pages Posted: 8 Jul 2021 Last revised: 27 Jan 2022

See all articles by David G. Kenchington

David G. Kenchington

Arizona State University (ASU) - School of Accountancy

Thomas Shohfi

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Jared D. Smith

North Carolina State University - Poole College of Management

Roger M. White

Arizona State University (ASU) - School of Accountancy

Date Written: June 28, 2021

Abstract

We study the New York City taxi market to examine whether an excise tax hike on cigarettes corresponds to smoker taxi drivers more frequently cheating their customers. Increased cheating could be motivated by both financial pressures and as a reaction to unfair treatment (as surveyed smokers view cigarette tax hikes as quite unfair). We examine this question using detailed ride-level data where we can identify a rare but fraudulent overcharging technique (cheating) and a subsample of taxi drivers who smoke (affected taxpayers, identified via tickets for smoking in a cab). In difference-in-differences regressions we find that following a cigarette tax hike, taxi drivers who smoke are approximately 1.5 times more likely to cheat customers than other drivers. Our findings are strongest in the subsample of smokers with consistently low earnings.

Keywords: Taxes, Cheating, Fairness

JEL Classification: D91, H23, H30, K42

Suggested Citation

Kenchington, David G. and Shohfi, Thomas and Smith, Jared D. and White, Roger M., Do Sin Tax Hikes Spur Cheating in Interpersonal Exchange? (June 28, 2021). Kenchington, David G., Thomas D. Shohfi, Jared D. Smith, and Roger M. White. 2022. “Do Sin Tax Hikes Spur Cheating in Interpersonal Exchange?” Accounting, Organizations and Society 96: 101281., Available at SSRN: https://ssrn.com/abstract=3875826

David G. Kenchington (Contact Author)

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

Thomas Shohfi

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburgh Building
110 8th street
Troy, NY 12180
United States

HOME PAGE: http://shohfi.com/

Jared D. Smith

North Carolina State University - Poole College of Management ( email )

Nelson Hall
Raleigh, NC 27695-8614
United States

Roger M. White

Arizona State University (ASU) - School of Accountancy ( email )

Tempe, AZ 85287
United States

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