Applying the psychology of taxpayer behavior could increase compliance with tax laws, and U.S. Department of Treasury officials have more insight on strategies, thanks to research by UNC School of Law assistant professor Kathleen Thomas.
She was recently invited to present two of her published papers to economists at the Treasury’s Office of Tax Analysis. The papers propose ways the government could improve compliance and decrease tax evasion through behavioral economics.
Thomas’s paper “Presumptive Collection: A Prospect Theory Approach to Increasing Small Business Tax Compliance,” published in Tax Law Review in 2013, focuses on self-employed taxpayers who don’t pay their taxes through withholding.
“The Psychic Cost of Tax Evasion,” published in Boston College Law Review in 2015, suggests ways the government could change the tax-filing process to encourage more honest reporting.
Some Office of Tax Analysis economists are conducting similar research about the connection between behavioral economics and taxpayer behavior.
“They asked incredibly insightful questions that gave me a new perspective on my own research and some insights to carry forward to future projects. I am usually presenting my work to other law professors, so it was an enlightening experience to share ideas with those directly involved in government,” Thomas says.
While at the Treasury, she also discussed her future research projects and learned more about some government research.
One of her new projects, with co-author Jay Soled of Rutgers University, will examine possible government regulation of tax-return preparation software.
“Because I am interested in how tax preparation software might play a role in improving taxpayer compliance, I was very interested to learn about some of the collaboration that already goes on between Treasury and the tax-software industry,” Thomas says.
Another new project focuses on low-income taxpayers who claim the earned-income tax credit and other government benefits.
“Improving the process for low-income taxpayers is another area where economists at the Treasury have dedicated attention, and I look forward to learning more about their ongoing research and relying upon it to inform my own work,” Thomas says.
Holning Lau, UNC School of Law professor and associate dean for faculty development, calls Thomas’s invitation to the Treasury “a great honor” and cites other recent faculty achievements. “We at Carolina Law are proud that our junior faculty members are garnering such well-deserved attention for their important research projects.”
-June 1, 2016