The Economics of Tax Compliance: Fact and Fantasy

Announcements by both the Internal Revenue Service and private analysts that in recent years unreported taxable income in the United States has been averaging 10-15 percent of total taxable income and that noncompliance seems to be growing rapidly have produced a certain sense of panic among commentators in academia, the private bar, government and the news media. One commentator went so far as to say: “the dramatic deterioration in compliance levels witnessed thus far, if not reversed quickly and forcefully, will gain further momentum and eventually erode, beyond repair, the integrity of our present income tax system.”