TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, January 16, 2005

Treasury's Office of Tax Analysis Publishes Optimal Tax Enforcement

TreasuryThe Treasury Department's Office of Tax Analysis has published Optimal Tax Enforcement: A Review of the Literature and Practical Implications (OTA Working Paper 90), by Janet G. McCubbin (Chief, Special Studies Branch, IRS Statistics of Income Division). Here is part of the abstract:

Treasury and the Internal Revenue Service have recently intensified compliance research and compliance enforcement activities. This paper contributes to the effort by reviewing two classes of theoretical models of tax enforcement, identifying some practical implications that can be drawn from these models, and suggesting some ideas for future research. Both optimal tax models and game theory models suggest that close coordination between tax policymakers and the tax administrator may be necessary. Specifically, IRS officials and policymakers should think carefully about what IRS’ enforcement objective should be, and how the overall objective can be implemented in various enforcement programs. The IRS must also collect the data that would allow researchers to estimate how taxpayers respond to tax and enforcement policies. Finally, Treasury, Congress and other policymakers need to take IRS constraints, incentives and likely responses into account when making tax policy and budgetary decisions, much as they take taxpayer behavior into account.

(Thanks to Bruce Bartlett for the tip.)

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