How you feel about government may determine how you avoid taxes

A new NBER working paper, "Political Alignment, Attitudes Toward Government and Tax Evasion," by Julie Berry Cullen, Nicholas Turner, Ebonya L. Washington rests on a very interesting model. 

Abstract:

We ask whether attitudes toward government play a causal role in the evasion of U.S. personal income taxes.  We first use individual-level survey data to demonstrate a link between sharing the party of the president and trust in the administration generally and opinions on taxation and spending policy, more specifically.  Next, we move to the county level, and measure tax behavior as elections, decided by the voting behavior in swing-states, push voters in partisan counties into and out of alignment with the party of the president.  Using IRS data, we find that reported taxable income increases as a county moves into alignment, with the increases concentrated in income sources that are easily evaded, due to lack of third-party reporting.  Corroborating the view that evasion falls, potentially suspect EITC claims and audit rates also fall.  Our results provide real-world evidence that a positive outlook on government lowers tax evasion.

More money for Massachusetts transportation won't solve problems

The Massachusetts Taxpayers Foundation this week released a new report on the state's transportation system.  Key take-away:

“What is clear is that the state lacks the requisite information to make profoundly difficult choices,” the report writes. “Questions such as which projects to fund and when, and how revenue sources should be allocated must be included as part of a long-term sustainable transportation finance plan to address our transportation needs. Unfortunately, the state has not yet adopted such a plan.”

MassLive.com has a good summary of the report. 

When pot laws are not the same across states, can we expect seepage?

In their new working paper, Benjamin Hansen, Keaton Miller, Caroline Weber ask "How Extensive is Inter-State Diversion of Recreational Marijuana?" Only a small amount they say. 

Abstract:

Despite federal prohibition, recreational marijuana is available to 21% of the United States population.  A chief concern among policy makers across multiple levels of government and political parties is inter-state diversion of marijuana from states with legal markets to others.  We measure this diversion with a natural experiment.  Oregon opened a recreational market on October 1, 2015, next to an existing market in Washington, which opened on July 8, 2014.  Using comprehensive administrative data on the universe of Washington sales, we find Washington retailers along the Oregon border experienced a 41% decline in sales immediately following Oregon's market opening.  Retailers along Washington's borders with Idaho and Canada experienced no such decline.  The decline occurred equally across weekdays and weekends, and was largest among the largest transaction sizes, suggesting diversion, not drug tourism, was to blame. Our estimates suggest that 11.9% of the marijuana sold in Washington was diverted out of the state before Oregon legalized and
7.5% remains diverted today.

A gated copy of the research paper can be found here. 

Upon whom does an energy tax fall? Who bears the burden?

Who Bears the Economic Costs of Environmental Regulations? by Don Fullerton, Erich Muehlegger

Abstract:
Public economics has a well-developed literature on tax incidence -
the ultimate burdens from tax policy.  This literature is used here
to describe not only the distributional effects of environmental
taxes or subsidies but also the likely incidence of non-tax
regulations, energy efficiency standards, or other environmental
mandates.  Recent papers find that mandates can be more regressive
than carbon taxes.  We also describe how the distributional effects
of such policies can be altered by various market conditions such as
limited factor mobility, trade exposure, evasion, corruption, or
imperfect competition. Finally, we review data on carbon-intensity
of production and exports around the world in order to describe
implications for effects of possible carbon taxation on countries
with different levels of income per capita.
Complete working paper from the National Bureau of Economic Research.