Dr. Ashley Craig, Ph.D.

Tax Knowledge and Tax Manipulation

Recently, Ashley Craig has published a paper (Craig & Slemrod 2024) with Joel Slemrod which provides a unified analysis of taxation and taxpayer education when individuals have an incomplete understanding of the tax system itself. They allow the tax system to be arbitrarily complex, reflecting individuals’ legitimate choices about how to earn incomes, as well as their efforts to avoid or evade taxes. The model demonstrates that learning about tax minimization strategies (tax manipulation) is no different to learning about tax rates. Either way, the government balances a trade-off: A better understanding of the tax system allows taxpayers to better optimize, but also affects government revenue. Optimal taxpayer education and the optimal amount of redistribution can both be characterized by aggregate sufficient statistics, which do not require information about how biases or behavioral responses vary across the decision margins. The researchers provide similarly simple rules for how tax rates on different income-generating activities should be set relative to each other.

Mr. Craig’s research spans Public Economics and Labor Economics, with a particular focus on human capital investment, taxation, and inequality. While visiting CES, he will continue this line of research, working with Itai Sher at the University of Massachusetts (Amherst). One of the implications of the work of Craig & Slemrod (2024) is that it may be welfare-improving for governments to mislead or fail to clarify misunderstandings about the tax system. Mr. Craig and Mr. Sher working to incorporate and study the implications of non-utilitarian criteria which constrain this type of behavior. Mr. Craig will also continue his other work, including on environmental taxation, discrimination, and criminal justice.

Ashley Craig is a Senior Lecturer in Economics at the Research School of Economics at the Australian National University (ANU). He is also affiliated with the Office of Tax Policy Research at the University of Michigan, the Institute of Labor Economics (IZA) and the ANU Tax & Transfer Policy Institute. Prior to joining ANU, Mr. Craig was an Assistant Professor at the University of Michigan Department of Economics. He received his PhD in Economics from Harvard University in 2019, and his undergraduate degree is from the University of Sydney. Previously, he worked as an Economist at the Reserve Bank of Australia.