How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs
- (pp. 38-57)
Abstract
This paper uses a quasi-experimental design to estimate the cost of filing taxes. Using US tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo large tax savings to avoid compliance costs, which provides a revealed preference estimate of such costs. I show that costs increase with income, consistent with an opportunity cost of time explanation. These estimates suggest substantial costs of filing federal income taxes, significantly larger than previously estimated using surveys.Citation
Benzarti, Youssef. 2020. "How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs." American Economic Journal: Economic Policy, 12 (4): 38-57. DOI: 10.1257/pol.20180664Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H26 Tax Evasion and Avoidance
- H31 Fiscal Policies and Behavior of Economic Agents: Household
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