Scholars and policymakers have long been intrigued by the relationship between patterns of compliance and enforcement. No context is perhaps more appropriate for study than the area of tax compliance, which embraces behavioral choices and decisions of most of the adult population, not just the criminally deviant. Interest in this area is even heightened by the marked decline in tax compliance and the Internal Revenue Service view that audits and audit coverage are its primary tools to engender compliance. Drs. Witte and Tauchen aim to address the effects of enforcement on income reporting behavior through combining theoretical study and rigorous empirical inquiry. Most researchers recognize that the difficulty of assessing the effects of audit policies is due to the fact that the odds of an audit and the level of compliance are determined simultaneously and that it is the parameters of the audit rule (not the probability of an audit) that should enter the compliance equation. Drs. Witte and Tauchen work to transcend this problem by estimating a model of tax compliance that deals with the simultaneity issue and allows the parameter of the audit rule to affect compliance. To accomplish this task, they will assemble a major data set building upon data from the Internal Revenue Services 1979 Tax Compliance Measurement Program, the Statistics of Income Program, the Census, and unpublished agency and administrative records. This study not only should advance our understanding of the relationship between administrative policies and compliance but also should yield a major data resource for future investigators' use.
