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corporate tax

The Effect on Compliance of Lowering Corporate Tax Rates is Uncertain

It is commonly accepted that lowering tax rates increases tax compliance and high tax rates encourage tax evasion.  The recent U.S. tax reform bill, the Tax Cuts and Jobs Act of 2017, was enacted partly due to assumptions that lowered tax rates would increase tax compliance and recover lost revenue.  Here, I examine the theoretical basis for the claim that lowering income taxes increases compliance, as well as the external evidence regarding the extent of increased compliance due to lowering tax rates.