Teaching Political Economy: On the Economics Significance of the Public's Job Approval Rating of the President

This study empirically investigates the hypothesis that the lower the public’s job approval rating of the U.S. President, the higher the degree of aggregate federal personal income tax evasion in the U.S. Using annual data on aggregate federal personal income tax evasion for the period 1960-2001 compiled by Feige, with 2001 being the most recent year for which these data are currently available, and allowing for such factors as federal income tax rates, IRS tax return audit rates, the tax-free municipal bond yield, the interest rate penalty on detected unreported income, public dissatisfaction with government officials (other than the U.S. President), and the Tax Reform Act of 1986, this study finds consistent empirical support for the hypothesis that income tax evasion is a decreasing function of the Presidential approval rating, i.e., that the lower (higher) the President’s approval rating, the greater (lower) the degree of aggregate federal personal income tax evasion. Finally, use of two well-known alternative estimates of the aggregate degree of federal personal income tax evasion yields results generally consistent with these conclusions.