Abstract
We use unique data to analyze employer tax compliance with Unemployment Insurance (UI) provisions. The data indicate that employers may have underreported $728 million of UI taxes nationally in 1987 alone. To formally examine this noncompliance, a theoretical model of payroll tax evasion is developed showing that increasing payroll tax rates, among other things, likely increases noncompliance by risk-neutral firms. This prediction is empirically verified. The finding that UI tax evasion is systematically related to various firm characteristics suggests that UI audits may be effectively targeted by statistical profiles derived from our model, thereby improving compliance.
Original language | English (US) |
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Pages (from-to) | 210-230 |
Number of pages | 21 |
Journal | Journal of Labor Economics |
Volume | 14 |
Issue number | 2 |
DOIs | |
State | Published - Apr 1996 |
ASJC Scopus subject areas
- Industrial relations
- Economics and Econometrics