Controlling the IRS: Principals, principles, and public administration

Theory: The behavior of government agencies reflects democratic principles of equal treatment and efficiency as well as the more-studied principle of responsiveness to elected political principals. Hypothesis: The variance in IRS enforcement actions against individual and corporate taxpayers across states and time can be explained by measures reflecting equal treatment of taxpayers, enforcement efficiency, and responsiveness to elected officials. Methods: We test the hypothesis using regression analysis of a pooled time-series of state-level audits of corporate and individual tax returns for the period of 1974-92. Results: The odds of corporate versus individual audits increase with increased Democratic control over Congress and change with different presidential administrations, but not with changes in state-level partisanship. The odds also respond significantly to changes in the composition of the taxpaying district and revenue base, suggesting IRS responsiveness to equity and efficiency.