Political Alignment, Attitudes Toward Government, and Tax Evasion

Abstract

We ask whether attitudes toward government play a causal role in the evasion of US personal income taxes. As turnover elections move voters in partisan counties into and out of alignment with the party of the president, we find with alignment (i) taxpayers report more easily evaded forms of income; (ii) suspect EITC claims decrease; and (iii) audits triggered and audits found to owe additional tax decrease. Coupled with evidence that alignment leads to more favorable views on taxation and spending, our results provide real world evidence that a positive outlook on government lowers tax evasion. (JEL D72, H24, H26, H31)

Emotions and Risk Attitudes

“…Given the pervasiveness of emotions and the fundamental role that risk attitudes play in most economic decisions, these results could bear relevance for diverse fields such as labor economics, health economics, and public economics. For instance, emotions could affect patients' treatment choices (Kőszegi, 2003), job search behavior and unemployment duration, or tax compliance (Cullen, Turner and Washington, 2020). Future research could examine when emotions play a particularly influential role, assess the relative influence of cognitive factors such as attention versus emotional influences, and investigate in more detail how individuals shield themselves from emotional decisions.…”

Partisan Entrepreneurship

“…4 A recent series of papers links partisanship with financial outcomes such as tax evasion, stock market liquidity, and retirement investing (Cullen et al, 2021, Cookson et al, 2020, Meeuwis et al, 2021.…”

Partisan Fertility and Presidential Elections

“…A few papers report a relationship between partisanship and spending on consumer goods (Benhabib and Spiegel, 2019, Gerber and Huber, 2009, Gillitzer and Prasad, 2018, but others have challenged this link (McGrath, 2017, Mian et al, 2021. Further, a group of papers have linked partisanship with financial outcomes, such as tax evasion, stock market trading, corporate credit, and retirement investing (Cookson et al, 2020, Cullen et al, 2021, Dagostino et al, 2020, Kempf and Tsoutsoura, 2020, Meeuwis et al, 2021 Across many nations, growing political polarization and declining fertility are two fundamental challenges facing society. We estimate e↵ects at the intersection of these two forces.…”