Income Tax Evasion Revisited: The Impact of Interest Rate Yields on Tax-Free Municipal Bonds

This study empirically investigates a hypothesis that the degree of aggregate federal personal income tax evasion may be influenced by the interest rate yield on high-grade municipal bonds. After allowing for the impacts of a variety of factors that typically have been inferred to influence income tax evasion, it is found that the higher the tax-free interest rate yield on high-grade municipal bonds relative to the taxable yield on 10-year Treasury notes, the lower the aggregate degree of federal personal income tax evasion.