American Taxation Association

JATA abstracts - 2005 Supplement

JATA - 2005 Supplement

Volume 27 supplement

Noncash Charitable Giving: Evidence of Aggressive Taxpayer Reporting Following a Compliance Change
Steve Buchheit, Teresa Lightner, John J. Masselli and Robert C. Ricketts

State-Sponsored College §529 Plans: An Analysis of Factors that Influence Investors' Choice
Raquel Meyer Alexander and LeAnn Luna

Treasury Bill Yield Reactions to the 1997 Capital Gains Tax Rate Reduction
Garth F. Novack

Attracting Nonfilers through Amnesty Programs: Internal versus External Motivation
Tracy S. Manly, Deborah W. Thomas and Christina M. Ritsema


Noncash Charitable Giving: Evidence of Aggressive Taxpayer Reporting Following a Compliance Change

Steve Buchheit, Teresa Lightner, John J. Masselli and Robert C. Ricketts

Abstract

Treasury Decision (TD) 8002 significantly relaxed the substantiation requirements for deducting noncash charitable contributions under $501 for tax years 1985 and after. We present evidence that TD 8002 caused a significant change in taxpayer behavior. Specifically, the relatively stable percentage of taxpayers who claimed zero noncash charitable deductions in years prior to TD 8002 decreased consistently and significantly after TD 8002's implementation. The decrease in zero noncash deduction taxpayers was largely replaced by taxpayers who reported noncash charitable deductions for amounts just under TD 8002's relaxed substantiation requirement (i.e., amounts just under $501). We present a series of tests supporting the contention that the increase in reported noncash charitable deductions is largely attributable to more aggressive reporting behavior rather than increased charitable giving.  Top


State-Sponsored College §529 Plans: An Analysis of Factors that Influence Investors' Choice

Raquel Meyer Alexander and LeAnn Luna

Abstract

Taxpayers have invested more than $45 billion in state-sponsored §529 college savings plans. Created by federal legislation in 1996 and enhanced by a 2001 tax law change, all 50 states and the District of Columbia now offer a §529 plan. Some states provide tax deductions and/or exemptions to taxpayers choosing in-state plans. Because of the lack of historical return data on these funds and the absence of comparable investment vehicles, investors rely extensively upon securities dealers for fund recommendations. Using proprietary panel data for 77 plans in 50 states over eight quarters, this paper compares tax and nontax factors that drive §529 investment choices. This paper explains why an investor may choose an out-of-state §529 plan despite losing a potential state tax deduction. This paper also has policy implications for lifetime savings accounts proposed by the Bush administration.  Top


Treasury Bill Yield Reactions to the 1997 Capital Gains Tax Rate Reduction

Garth F. Novack

Abstract

I provide evidence that changes in shareholder-level taxes influence investment returns even when income from the investment is not subject by statute to the rate that is changed. Using an equilibrium model of after-tax investment returns I predict the yields of Treasury bills, which are subject only to ordinary tax rates, will have an inverse reaction to changes in the capital gains tax rate as the income on them becomes increasingly tax-disadvantaged when compared to other investments. In a sample comprised of short-term Treasury bills, yields appear to increase in response to the May 7, 1997 surprise reduction in capital gains tax rates. The increase is statistically significant and is robust to other macroeconomic and institutional determinants of Treasury bills.  Top


Attracting Nonfilers through Amnesty Programs: Internal versus External Motivation

Tracy S. Manly, Deborah W. Thomas and Christina M. Ritsema

Abstract

We investigate a subset of nonfilers by analyzing data provided by the Arkansas Department of Finance and Administration (DFA) from the 1997 Arkansas State Tax Penalty Amnesty. Our data sources include the tax returns filed by amnesty participants, a voluntary, confidential survey completed by approximately 32 percent of amnesty filers, and a list of amnesty participants who received a notice from DFA under the FedState data-sharing program during the amnesty period.

We divide our sample into three groups based on motivation for participating in the amnesty program. The first group consists of taxpayers who did not receive a notification from the DFA under the FedState data-sharing program and chose independently to participate in the amnesty. This group is designated as internally motivated. A second group of taxpayers, labeled as externally motivated, received a DFA letter, and their survey responses indicate that they would not have known otherwise that they were noncompliant. The third group received a letter and were aware of their failure to file Arkansas returns. The motivations of this group are mixed.

Using both univariate tests and multinomial logistic regression, we compare these three groups on four dimensions: tax return information, demographic information, excuses for failure to file, and reasons for voluntarily coming forward during the amnesty period. We find that the groups are different on several dimensions, most notably income level and excuses offered for failure to file a return when due.  Top

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