Electronic Tax Filing in the United States: An Analysis of Possible Success factors

Abstract

Abstract: This study summarizes and analyses the demographic, socio‑economic, and geographic factors affecting electronic tax filing (e‑filing) in the United States for the years 1999, and 20042007 and the growth in e‑filing between 1999 and 2007. Beyond the descriptive analysis, two issues related to electronic tax filing are target of further analysis: First, the variables having a positive impact on e‑filing rates and e‑filing growth are analysed. Second, because a more detailed look at state and county data indicates high variability within and between states, some demographic, socio‑economic, and geographic variables are examined in more detail. This second question addresses the possibility that e‑filing just like other initiatives involving electronic media could increase the digital gap. We use zip‑code level e‑filing information and county level demographic, income and unemployment data for each of the years in question. Our findings indicate significant variation in e‑filing rates across and within states, and rapid growth over time. E‑filing rates are found to be lower in rural counties, counties with low population size, counties with a lower share of females, counties with a higher share of Hispanics and Asians, and counties with a higher share of the elderly population. Surprisingly, educational attainment is negatively correlated with e‑filing rate and growth in e‑filing.