An Attempt at Evaluating the Effect of Tax Morale on Tax Evasion

52 Pages Posted: 19 Jan 2022

See all articles by Tom Kisters

Tom Kisters

Vienna University of Economics and Business - Department of Economics

Date Written: January 19, 2022


Although there is ample research on what affects tax morale, empirical evidence that tax morale affects tax evasion is scarce. The reason for this scarcity, is the difficulty to connect a measure of tax morale to a reliable proxy of tax evasion. The primary contribution, is that I identify an opportunity to make such a connection, and use this opportunity to estimate a causal effect of tax morale on tax evasion.
Using 7367 U.S. observations from the World Value Surveys (WVS), I first show that there is a strong relation between demographic characteristics, such as age, gender, ethnicity on the one hand and tax morale on the other. Having established this link, I take advantage of detailed demographic information in US census data, to create post-stratified samples at the county level, which I use to predict county-level estimates of tax morale. This data is then linked to income tax return data, provided by the IRS, creating a panel data, consisting of 2984 counties, spread over 4 years (1999, 2006, 2011 and 2017). With this data I provide empirical evidence of the effects of tax morale on tax evasion.
The key issue to address is the potential endogeneity concern connected to the county values of tax morale. I firstly address this issue with an instrumental variable approach. The second approach attempts to remove spurious covariation by making use of demographic fluctuations within counties. The results suggest that a percentage increase in tax morale at the county level might increase income reporting for non-wage earners by 5 to 7%. A third approach mimics the approach by Cullen et al. (2021), but is unable to reproduce the results.

Keywords: Tax Morale, Tax evasion, Instrumental Variable, Post-Stratification

JEL Classification: C26, C33, H26, H24, D12, C31

Suggested Citation

Kisters, Tom, An Attempt at Evaluating the Effect of Tax Morale on Tax Evasion (January 19, 2022). WU International Taxation Research Paper Series No. 2022-02, Available at SSRN: or

Tom Kisters (Contact Author)

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien

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