Attitudes toward Tax Evasion and the Choice of Self-Employment

It is generally believed that self-employment offers ample opportunities for tax evasion. Therefore, this paper examines whether attitudes toward tax evasion has any influence on the choice of self-employment. Our analysis, based on a random sample of Americans, indicates that an individual who believes that tax evasion is “not wrong and a bit wrong” is more likely to be self-employed as compared to an individual who believes that tax evasion is “wrong and seriously wrong.” This decision is not affected by gender. In addition, our analysis finds that a self-employed person earns more income than a person who works for someone else. However, an individual who believes that tax evasion is “wrong and seriously wrong” earns more than an individual who believes that tax evasion is “not and a bit wrong”. Moreover, a self-employed person who believes that tax evasion is “not and a bit wrong” earns less than all other people, with all other parameters being the same.