Date of Award

8-10-2021

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Vjollca Sadiraj

Second Advisor

James C. Cox

Third Advisor

Sally Wallace

Fourth Advisor

Yongsheng Xu

Fifth Advisor

Brian Erard

Abstract

The central theme of my dissertation is understanding the relationship between different types of institutions and individual behavior. The types of institutions I specifically study are tax enforcement agencies, charities, and governments. The corresponding responses I examine are tax compliance, giving, and tax sheltering.

One of the Internal Revenue Services' audit methods is to select individuals engaged in transactions with other taxpayers whose tax returns were selected for audit. This joint liability in the audit mechanism introduces an externality where one's action affects the likelihood of others being audited. Therefore, it can induce different tax compliance behavior compared to the random selection audit mechanism. Chapter 1 studies the effectiveness of this group accountability audit mechanism against a purely random selection audit mechanism using a lab experiment. Data shows that tax compliance is higher in the group accountability audit mechanism than in the random selection audit mechanism.

Chapter 2 uses laboratory experiments to study individual decisions on donating to a charity in response to changes in the tax rate and income in the presence of matching and two types of rebate subsidies: deterministic and stochastic. Private consumption is taxed, and contributions are subsidized such that the relative price of giving across the fundraising mechanisms is equivalent. Data shows that tax framing and rebate subsidy elicit less charitable contribution than neutral framing and matching subsidy; the negative effect on donation is smaller for stochastic than deterministic rebate subsidies.

Chapter 3 examines the effect of identification with the government on tax sheltering behavior using secondary data. Individuals' attitudes towards a new government depend on whether their political preference is aligned with the elected government leader. Those who are aligned are more likely to be positive and agree with how the government uses tax revenue. On the other hand, those who are not aligned are more likely to be negative and disagree with how the tax revenue is spent. Such emotions and attitudes towards the new government may be reflected through the tax sheltering behavior. I find that charitable contribution deduction increased for counties that were not politically aligned when the presidency changed.

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