Essays in Tax Administration and Enforcement

Abstract

This dissertation uses a combination of administrative tax records and publicly available census and other demographic data to examine patterns in tax filing behavior and enforcement. Chapter I measures historical disparities in audit rates between Black and non-Black filers, examining both root causes and potential remedies. Chapter II considers the determinants of spousal name order on joint tax returns and associations of name order with other filing behaviors. Chapter III evaluates the role of tax preparers in the distribution of tax-administered benefits programs.

Chapter I, co-authored with Hadi Elzayn, Tom Hertz, Cameron Guage, Arun Ramesh, Robin Fisher, Dan Ho, and Jacob Goldin, studies differences in IRS audit rates between Black and non-Black taxpayers. As the IRS does not observe taxpayer race, the chapter develops a novel partial identification strategy to estimate these differences. Despite race-blind audit selection, we find that Black taxpayers are audited at 2.9 to 4.7 times the rate of non-Black taxpayers, with disparities concentrated among taxpayers claiming the EITC. Using counterfactual audit selection models, we find that maximizing the detection of underreported taxes would not lead to Black EITC claimants being audited at higher rates. Rather, modifying the audit selection algorithm to target total underreported taxes, rather than refundable credit overclaims, would reduce the share of audited taxpayers who are Black and would lead to more audits focused on accurate reporting of business income and deductions, fewer audits focused on the eligibility of claimed dependents, higher per audit costs, and more detected noncompliance.

Chapter II, co-authored with Emily Lin, Joel Slemrod, and Alexander Yuskavage, finds that opposite-sex married couples filing a joint return put the male name first 88.1% of the time in tax year 2020, down from 97.3% in 1996. The man’s name is more likely to go first the larger is the fraction of the couple’s allocable income that goes to him, the older is the couple, and when the man is the older or higher-earning spouse. However, compared to same-sex couples, the influences of the age and earnings on the name order of opposite-sex couples’ tax returns are limited by gender norms. We calculate that, without the constraints of gender norms, the probability of the male name going first would be 27 percentage points lower for the returns filed by opposite-sex couples. Based on state averages, putting the man’s name first is strongly associated with conservative political attitudes, religiosity, and sexist attitudes. Risk-taking and tax noncompliance are both associated with the man’s name going first.

Chapter III examines the role of paid tax preparers in the distribution of COVID-19 related benefits programs. Using an instrumental variables approach that employs tax year 2017 rates of preparer use as an instrument for 2021 rates of use, I find that preparers had a significant, positive impact on the uptake of the EITC and CTC, and on the per-return average dollar amount of benefits claimed for EIP and CTC. Specifically, a 10% increase in the per-county rate of paid preparer use leads, on average, to 240-510 additional CTC claims, 180-450 additional EITC claims, $1.9M - 6.2M in EIP benefits, and $0.9M - 2.3M CTC benefits per 100,000 filers. These results show that the availability of tax preparers has a meaningful impact on taxpayers' ability to access benefits programs.