Did Tax Reform Reduce Actual U.S. Progressivity?: Evidence from the Taxpayer Compliance Measurement Program

Abstract

Micro data from audited tax returns are used to evaluate changes in the actual progressivity of U.S. federal income taxes in 1979 and 1988, which is distinct from apparent progressivity. Statistical inference methods are applied to global measures of both actual and apparent residual and liability progression. The analysis reveals an absence of change in the overall level of actual residual progressivity but statistically significant declines in actual liability progression. The results indicate that in assessing overall tax progression it is important to take sampling errors into account and that measures of actual tax progressivity can deviate significantly from apparent progressivity.

JEL Classification: H23, H26