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Historical Evidence on the Tax Evasion Impact of Government Audits and Tax Rates in the U.S



This study empirically investigates the impact of federal personal income tax rates and IRS personal income tax return audit rates on aggregate income tax evasion over the 1957-1997 period. This period represents the longest over which the potential tax-evasion impacts of these two factors in the U.S. have ever been formally investigated. In a model that allows for the effects of a variety of other factors, it is found that the degree of aggregate income tax evasion is decreased by higher audit rates and increased by higher average effective personal income tax rates.

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