American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
The Micro-geography of Tax Avoidance: Evidence from Littered Cigarette Packs in Chicago
American Economic Journal: Economic Policy
(pp. 61–84)
Abstract
The large tax differentials between Chicago and neighboring jurisdictions provide an incentive for cigarette tax avoidance. Data from a random sample of cigarette packs littered in Chicago reveals a startling degree of tax avoidance: three-quarters did not display a Chicago tax stamp. Also, the $2.68 difference between the tax in Chicago and surrounding counties decreases the probability of a local stamp by almost 60 percent, and a one mile increase in distance to the lower-tax state border increases the probability a pack of a local stamp by about one percent. These results are consistent with the predictions of economic theory. (JEL H25, H26, H71)Citation
Merriman, David. 2010. "The Micro-geography of Tax Avoidance: Evidence from Littered Cigarette Packs in Chicago." American Economic Journal: Economic Policy 2 (2): 61–84. DOI: 10.1257/pol.2.2.61Additional Materials
JEL Classification
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- H26 Tax Evasion
- H71 State and Local Taxation, Subsidies, and Revenue