High tax compliance will reduce rather than facilitate the growth of government spending. There are several reasons for this. First, tax evasion reduces the effective price of public programs thus increasing the quantity demanded. Second, tax evasion is not uniform across income classes and the...

Individuals whose income is not reported to the tax authority by a third party (e.g., the self-employed and those earning casual wages such as tips) may be less likely to be detected evading taxes relative to the case in which they are subject to third-party reporting. However, the compliance...