How taxing is tax filing? using revealed preferences to estimate compliance costs Youssef Benzarti
By: Benzarti, Youssef
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Material type: 
ArticlePublisher: 2020Subject(s): DECLARACIONES TRIBUTARIAS | COSTES DE CUMPLIMIENTO | GASTOS SOCIALES | ESTADOS UNIDOS
In:
American Economic Journal : Economic Policy v. 12, n. 4, November 2020, p. 38-57Summary: This paper uses a quasi-experimental design to estimate the cost of filing taxes. Using US tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo large tax savings to avoid compliance costs, which provides a revealed preference estimate of such costs. I show that costs increase with income, consistent with an opportunity cost of time explanation. These estimates suggest substantial costs of filing federal income taxes, significantly larger than previously estimated using surveys.
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This paper uses a quasi-experimental design to estimate the cost of filing taxes. Using US tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction. Taxpayers forgo large tax savings to avoid compliance costs, which provides a revealed preference estimate of such costs. I show that costs increase with income, consistent with an opportunity cost of time explanation. These estimates suggest substantial costs of filing federal income taxes, significantly larger than previously estimated using surveys.
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