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This paper in NBER (summarized at WAPO) is not saying what many think it says. It says that the state can get more revenues by auditing the rich. It doesnt say the rich cheat more! #econtwitter
https://twitter.com/BrianCAlbrecht/status/1668986738126073856
Why? I used to be interested in illegal work, sidelines, underground economy etc. I can tell you that cheating at the low-end of the ladder is easier because the sums are smaller and easier to hide.
After all, working a day for $200 cash for a moving company in Montreal (I never did that) when you are low-income is easier to hide than a large sum of unreported income or deliberately inflating expenses etc.
Proportionally, however, that cheating at the low end is greater as a share of income. This also eschews proceeds from criminal activity which tends to be concentrated at the low-end. So, even the horrible Zucman paper tends to misestimate cheating at the bottom.
Why does this matter? Because the graph is not only showing the marginal benefit *to the state* (in terms of revenues) of auditing, it is also showing the inverse of the marginal cost of finding 1$ of extra revenue by income class!
All this is saying (and the authors acknowledge it) is that the state can press the lemon at the top easier than at the bottom. No shit...but that is not equivalent to saying saying cheating happens at the top...
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