Redistribution through the income tax: The vertical and horizontal effectsof noncompliance and tax evasion

This article uses the unique Taxpayer Compliance Measurement Program (TCMP) micro data to study the equity effects of noncompliance. The authors acces s 4 years of TCMP data: 1979 1982, 1985, and 1988. The TCMP data allows the authors to observe income and tares before and after a tax audit. To gener ate a range of scalar estimates of the redistributive impact of more comple te compliance, the authors employ the family of extended Gini and concentra tion coefficients. They find that the Vertical equity effects of noncomplia nce are very small or negative; however there is a considerable amount of h orizontal inequity generated by noncompliance, and in this sense more compl ete auditing of tax returns could improve the fairness of the tar system.