How it works
The issue of illegal tax evasion has always been and probably will always be an issue in the United States. As it may be, the United States has one of the highest rates of tax loss through tax evasion. After the budget for the IRS was cut, Julie Berry Cullen began looking into the issue of tax evasion in the US. Her main question revolved around the willingness to pay taxes and the relationship between this willingness and party alignment in the government and the taxpayers.
She presented her lecture “Political Alignment, Attitudes Towards Government and Tax Evasion” on October 19th at MSU.
Julie Cullen is a professor in the Department of Economics at the University of California, San Diego. In addition to teaching at the University of California, Cullen works with the National Bureau of Economic Research as a research associate. She has also been a Robert Wood Johnson Health Policy Scholar, a faculty member at the University of Michigan, and has held a visiting position at Northwestern University. She has specialized her research in the economics of education, fiscal federalism, and behavioral responses to taxation as well as social insurance, all under her primary field of research in public economics. Her work has been published in Econometrica, the Journal of Labor Economics, the Journal of Public Economics, and the Review of Economics and Statistics.
The basis of the lecture regarded the motive for US citizens to avoid their patriotic duty by not paying taxes. Cullen’s research lead her to the conclusion that individuals are more likely to pay their taxes when they agree with the governmental policies at the moment. She did this through the analysis of party alignment. By modeling the rate of evasion by state and the party majority by state, she was able to derive vague conclusions to support her hypothesis. The states which represented the current executive political party had higher tax retention rates than those which disagreed with the executive party. According to Cullen, the real issue at hand is that attitudes can be manipulated in an unhealthy and illogical way. These attitudes have too much effect on the actions people take. Another cause for the high rates of tax evasion in the US is the policy behind tax evasion. In reality, evasion is modeled as a financial gamble. The action can save vast sums of money (for the taxpayer) and only has a one percent audit rate. Of those audited, the consequence involves paying twenty percent of what they owed.
With these statistics, why are we paying our taxes? Before anything happens, there needs to be a higher consequence for tax evasion. Political and moral values aside, the primary motive for individuals in our capitalist society is money. The best way, in my opinion, to eliminate this issue is to provide some sort of economic incentive to pay taxes. This could be done through higher consequences for tax evasion or more government-subsidised rewards for paying taxes. In addition, something needs to be done about the attitudes Americans act on. Having an opinion is healthy, but having a stubborn and close-minded attitude to the point of tax evasion is not. In order to let the US government perform its duty, the US citizens must fund it.