Tax Compliance: An Investigation Using Individual Tcmp Data

37 Pages Posted: 5 Jul 2004

See all articles by Helen Tauchen

Helen Tauchen

University of North Carolina (UNC) at Chapel Hill - Department of Economics; National Bureau of Economic Research (NBER)

Ann Dryden Witte

Wellesley College - Department of Economics; National Bureau of Economic Research (NBER)

Kurt J. Beron

University of Texas at Dallas - Department of Economics & Finance; National Bureau of Economic Research (NBER)

Date Written: August 1989

Abstract

In this paper, we analyze the tax compliance behavior of US taxpayers by using a 1979 data set that combines information from a random sample of individual tax returns each of which has been thoroughly audited, IRS administrative records, and sociodemographic data from the Census. We find evidence that both audits and tax code provisions affect compliance. However, the effects are significant for only the low and high income groups. Interestingly, previous research has shown that these groups also participate most actively in underground economic activities, the income from which is not reported on any tax returns. Our results for audits suggest that the "ripple" or general deterrent effect of audits may be many times larger than the direct revenue yield of audits for high income taxpayers. Our results for allowable subtractions from income imply that the 1986 Tax Reform Act changes to lower allowable subtractions may have procompliance effects.

Suggested Citation

Tauchen, Helen V. and Dryden Witte, Ann and Beron, Kurt J., Tax Compliance: An Investigation Using Individual Tcmp Data (August 1989). NBER Working Paper No. w3078, Available at SSRN: https://ssrn.com/abstract=227483

Helen V. Tauchen (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States
919-966-2384 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ann Dryden Witte

Wellesley College - Department of Economics ( email )

106 Central Street
Wellesley, MA 02181
United States
781-283-2163 (Phone)
781-283-2177 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kurt J. Beron

University of Texas at Dallas - Department of Economics & Finance ( email )

Richardson, TX 75083
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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