Financial Economics Meets Tax Policy

摘要

Following this Introduction, there are five distinct studies that constitute this Special Section of the Atlantic Economic Journal, where the emphasis is on financial economics and public policy. For purposes of the studies provided here, financial economics is broadly defined to include not only purely mainstream financial economics issues, such as banking, lending, and interest rate yields, but also market responses to tax policies and certain financial market and other public policies. Each of the studies provided here endeavors to provide new empirical insights that can be of use both to researchers and within the classroom as well. The study by Alm et al. (2020) is intended to help disentangle individual taxpayers' responses to audit rate changes undertaken by Internal Revenue Service (IRS) personnel. In pursuit of this goal, the authors collected individual-level data from a series of identical laboratory experiments in which only audit rates were changed, a de facto ceteris paribus-embracing procedure. The authors stress that the measures of income tax compliance are accurate and unambiguous measures that reflect individual choices. These measures were also derived in a setting that controlled explicitly for extraneous influences on individual behavior, which thereby can clearly permit identification of the impact of a change in a single policy variable (i.e., the audit rate) on the behavioral outcome of interest (e.g., individual income compliance). Although there are obvious reasons for caution in using and interpreting data collected from laboratory experiments, the laboratory offers an opportunity to investigate, in a controlled environment, individual responses to audit rate changes, and, importantly, to distinguish individual responses from average responses.