Identification with the Government and Tax Sheltering - S. Kim
Individuals’ attitudes towards government spending may be affected by the degree of concordance between their political beliefs and the political views of the administration. Those who politically align with the government are more likely to agree with its fiscal policy and gain more utility from the public goods provided by the government. On the other hand, the poorly politically aligned individuals may disagree with the government spending priorities that potentially target the provision of public goods less valued by such individuals. Taxpayers may channel such emotions and attitudes towards the government through tax avoidance. I test this hypothesis by studying the relationship between the share of votes for the winning party by county and the total amount of charitable contribution deductions claimed by county. I find that charitable contribution deduction per tax return increased for counties that experienced a mismatch in political alignment when the presidency changed from President Bush to President Obama.
Group Accountability and Tax Evasion - S. Kim, and P. Arora
Tax enforcing agencies have limited government budget for audits. As a result, it is important to develop cost-efficient audit strategies that deter tax evasion. One of the methods the IRS uses for audits is to pick individuals who are engaged in transactions with other taxpayers whose tax returns were selected for audit. This joint liability in the audit mechanism introduces an externality where one’s action affects the likelihood of others being audited. Therefore, it can induce different tax compliance behavior compared to an individual liability audit mechanism. We study the effectiveness of this group accountability (GA) audit mechanism against a purely random selection individual accountability (IA) audit mechanism using a lab experiment. In the GA audit mechanism, taxpayers are exogenously combined into several groups. Cheating by an audited person in the group triggers audits to all members of the group. Our data show that tax compliance is higher in the GA audit mechanism compared to the IA audit mechanism. The effect is robust with or without anonymity among group members and across various group sizes.
Tax Framing in Matching and Rebate Subsidy - S. Kim, V. Sadiraj and Y. Xu
We examine consistency (Sen’s alpha axiom) of the individual decision on donating to a charity, in response to variations of changes in the tax rate and income through matching and rebate subsidies embedded within a tax framework. More specifically, private consumption is taxed, and contributions are subsidized, either in the form of a matching subsidy or rebate subsidy. The laboratory setting makes it possible to keep the relative price of giving identical in all fundraising mechanisms. If the relative price of giving is the only factor that affects charity decisions, then an individual should make the same amount of contributions across treatments. We implement two types of rebate subsidies: deterministic and stochastic. In the stochastic rebate subsidy, part of the donation is refunded only with some probability, but at a larger amount. The data from the experiment shows that charitable contribution is lower under tax framing compared to the case without the tax framing. We observe a negative effect on donations for rebate subsidy and not for matching subsidy. Stochastic rebate subsidies have a smaller negative effect on donations than the deterministic rebate subsidies. Regarding changes in tax rate and income, donations decrease when private consumption becomes more expensive, but they increase with income.
Medicaid Coverage Expansion and 30-day Readmission after Acute Ischemic Stroke - B. McGee, S. Kim, D. Aycock, M. Hayat, K. Seagraves, and W. Custer
Health insurance promotes access to follow-up care that can mitigate the risk of readmission after stroke, but 12 states do not participate in the Affordable Care Act’s Medicaid expansion. Most non-expansion states have large minority populations with disproportionate stroke burden, yet Medicaid expansion may reduce racial health disparities. We employ difference-in-difference analysis to evaluate whether the probability of 30-day hospital readmission after acute ischemic stroke changed differentially between Medicaid expansion and non-expansion states. We also study whether race/ethnicity moderated the association between expansion and readmission. Medicaid expansion was not observed to reduce overall post-stroke readmissions after one year. Contrary to our hypothesis, expansion was associated with increased readmissions for white patients relative to other groups. Future studies should unpack whether this disparity was due to racial/ethnic differences in access to needed inpatient care.