Non‐monetary sanctions as tax enforcement tools: Evaluating California's top 500 program

Many U.S. states and countries around the world use non‐monetary sanctions, including public disclosure, license suspension, and withholding of other government‐provided benefits or privileges, to encourage tax compliance. Little is known about the effectiveness of these programs. Using administrati...

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Bibliographic Details
Published in:Journal of policy analysis and management 2024-10, Vol.43 (4), p.1057-1078
Main Authors: Angaretis, Chad, Galle, Brian, Organ, Paul R., Prohofsky, Allen
Format: Article
Language:English
Subjects:
Compliance
Enforcement
Licenses
Notices
Personal information
Sanctions
States
Suspension
Taxation
Welfare
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Summary:Many U.S. states and countries around the world use non‐monetary sanctions, including public disclosure, license suspension, and withholding of other government‐provided benefits or privileges, to encourage tax compliance. 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. Exploiting variation over time in the cutoff balance for program eligibility, we find evidence of strong positive compliance responses to the program. We also develop estimates of the long‐run revenue and social‐welfare effects of the program. Together, these results suggest that non‐monetary sanctions can be efficient tax enforcement tools, at least among the relatively high‐income population we study.
ISSN:0276-8739
1520-6688
DOI:10.1002/pam.22595