Citizenship and taxes. Conditionally Accepted, International Tax and Public Finance. PDF link.
Abstract: The U.S. tax system applies to its citizens’ worldwide incomes and estates, whether those citizens live in the U.S. or abroad. Fully escaping the U.S. tax system requires renouncing U.S. citizenship, and in recent years a growing number have done so. Using administrative tax microdata, I provide new descriptive information about the population of individuals who have renounced U.S. citizenship. The typical renouncer had long lived abroad, was slightly wealthier than the typical American, and reported no or little net U.S. tax liability prior to their renunciation. Combined with information on the foreign jurisdictions where renouncers reside, the evidence suggests that most recent renunciations are a result of increasing compliance costs of maintaining U.S. citizenship while living abroad, and not a response to U.S. tax liability.
Non-Monetary Sanctions as Tax Enforcement Tools: Evaluating California’s Top 500 Program (with Chad Angaretis, Brian Galle, and Allen Prohofsky). SSRN link, revised version available by request. Submitted.
Abstract: Many U.S. states and countries around the world use non-monetary sanctions to encourage tax compliance, including public disclosure, license suspension, and withholding of other government-provided benefits or privileges. Little is known about the effectiveness of these programs. Using administrative tax microdata from California’s “Top 500” program, we study whether notices warning of the imminent publication of a taxpayer’s personal information and potential license suspension affect payment and other compliance outcomes, as well as whether these notices affect subsequent reported earnings. Exploiting variation over time in the cutoff balance for program eligibility we find evidence of strong positive compliance responses to the program, with no evidence of an impact on subsequent reported earnings. We also develop estimates of the deadweight loss caused by publication of non-compliers, and conclude that the program generates positive net social welfare. Together, these results suggest that non-monetary sanctions can be efficient tax enforcement tools, at least among the relatively high-income population we study.