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Taxing Marijuana and the Road to Reparations:  Comparing the Colorado and Illinois Cannabis Markets

By Tommaso Carlo Filippo Babucci  

Although still prohibited at the federal level, cannabis can now be found on the shelves of recreational dispensaries across thirty-three U.S states. This thesis examines the development of this legal market from both historical and empirical perspectives.  Using a new data set, it estimates the determinants of cannabis sales and tax revenues in the Colorado market and analyzes the incidence of a single tax increase. The results, which suggest that legal cannabis behaves like a luxury good, are used to analyze the potential for cannabis-funded reparations programs in Illinois, which recently approved recreational sales of cannabis.

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Advisors: Professor Connel Fullenkamp | JEL Codes: H2, R50, L15

Tax Evasion and Tax Morale in Latin America

By Sofia Becerra

Tax evasion throughout the world is widely endured, but not widely understood. The decision making process of the taxpayer may include many concerns outside of the monetary payoffs. The tax compliance decision considers social norms and social sanctions in addition to deterrence levels. The goal of this paper is to illuminate some of the social norms and factors that affect tax morale, since tax morale in turn drives part of compliance. An empirical study comparing tax morale in 18 Latin American countries finds that, social factors like perception of evasion by peers, as well as government trust and approval, are significant determinants of tax morale. Moreover, culture also plays a role. However, its role is not nearly as large as believed, and cannot be explained much of the variance across countries. Compliance is partly explained by tax moral, which is partly explained by culture. Tax morale will drive higher compliance all else equal, but compliance is also a function of deterrence, and both factors work in a feedback loop. Social norms and culture develop through assimilation of deterrence mechanism over time and so, culture need not be deterministic since it mutable.

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Advisor: Michelle Connolly | JEL Codes: H2, H26, H31 | Tagged: Argentina, Chile, Latin America, Tax Evasion, Tax Morale


Undergraduate Program Assistant
Jennifer Becker

Director of the Honors Program
Michelle P. Connolly