The Effect of Tax and Audit Rates on Compliance with the Federal Income Tax, 1977-85

1987/04/01 by Jeffrey A. Dubin, Dubin, Jeffrey A., Michael J. Graetz +3
Economics, Econometrics and Finance · Social Sciences · #Fiscal Policy and Economic Growth #Gender, Labor, and Family Dynamics #Taxation and Compliance Studies

paper · pdf · doi:10.7907/gk55y-d2k84

openalex publication_date 1987/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/15

Abstract

This paper develops a game-theoretic model of the effects of state and federal income tax rates and audit rates on compliance with the federal income tax. Using data drawn primarily from the Annual Reports of the Commissioner of Internal Revenue for the years 1977-85, we find empirical confirmation of the model's prediction that increases in the tax rates increase compliance. We also investigate the overall performance of the federal revenue collection process and find that the entire IRS estimate of the increase in individual noncompliance during 1977-85 is more than accounted for by the decrease in auditing over the same period.

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