Government agencies around the world use data-driven algorithms to allocate enforcement resources. Even when such algorithms are formally neutral with respect to protected characteristics like race, there is widespread concern that they can disproportionately burden vulnerable groups. We study differences in Internal Revenue Service (IRS) audit rates between Black and non-Black taxpayers. Because neither we nor the IRS observe taxpayer race, we propose and employ a novel partial identification strategy to estimate these differences. Despite race-blind audit selection, we find that Black taxpayers are audited at 2.9 to 4.7 times the rate of non-Black taxpayers. The main source of the disparity is differing audit rates by race among taxpayers claiming the Earned Income Tax Credit (EITC). Using counterfactual audit selection models for EITC claimants, we find that maximizing the detection of underreported taxes would not lead to Black taxpayers being audited at higher rates. In contrast, in these models, certain policies tend to increase the audit rate of Black taxpayers: (1) designing audit selection algorithms to minimize the “no-change rate”; (2) targeting erroneously claimed refundable credits rather than total under-reporting; and (3) limiting the share of more complex EITC returns that can be selected for audit. Our results highlight how seemingly technocratic choices about algorithmic design can embed important policy values and trade-offs.

Interviews & Quotes

• Dan Ho and Evelyn Smith were quoted in The New York Times,
  “Black Americans Are Much More Likely to Face Tax Audits, Study Finds“
• Evelyn Smith was a guest on NPR’s Morning Edition,
  “Does the IRS audit some people more often than others?“
• Dan Ho, Evelyn Smith, and Hadi Elzayn were quoted in Tax Notes,
  “Black Taxpayers Much More Likely to Be Audited, Report Finds“
• Dan Ho was quoted by MarketWatch,
  “The IRS audits Black taxpayers at far higher rates, study says“
• Dan Ho and Evelyn Smith were quoted in the Vancouver Times,
  “As IRS Expands, Study Shows The Agency Audits Black People At Least Thrice As Much As Other Racial Groups“
• Evelyn Smith was quoted by Kiplinger,
  “Does the IRS Audit Some Taxpayers More Than Others?“
• Hadi Elzayn was interviewed by KTVU News
• Hadi Elzayn was interviewed by KNX Newsradio
• Dan Ho was quoted in Deseret News,
  “The IRS is about 3 times more likely to audit Black taxpayers compared to other races, study finds“
• Dan Ho and Evelyn Smith were quoted on CBS News,
  “Black Americans more likely to be audited by the IRS than any other race“
• Dan Ho was interviewed by KCBS
• Dan Ho and Evelyn Smith were guests on The Laura Coates Show
• Dan Ho was quoted on BET,
  “Stanford University Researchers Find Black Taxpayers 3-5 Times Likelier to Be Audited By the IRS“
• Evelyn Smith was quoted by Yahoo Finance,
  “Black Americans more likely to be IRS audited than other races“
• Dan Ho was was a guest on NPR’s 1A,
  “Racial Inequality In The U.S. Tax System“
• Evelyn Smith was quoted by CNBC,
  “IRS about 3 to 5 times more likely to audit Black Americans’ tax returns, study finds“

Other Selected Coverage

• Stanford HAI, “IRS Disproportionately Audits Black Taxpayers“
• Nina Olson (former National Taxpayer Advocate), from Procedurally Taxing
• Rep. Richard E. Neal (D-MA, Ranking Member of the Ways and Means Committee), “Neal Statement On Alarming Audit Rates Of Black Americans“
• The Hill, “Black taxpayers more than three times more likely to be audited by IRS“
• Law360, “Black Americans Face Much Greater Audit Rates, Study Finds“
• Washington Times, “IRS subjects Black taxpayers to more audits, study finds“
• Washington Free Beacon, “Report: IRS Three Times More Likely To Audit Blacks“
• The Root, “The IRS Targets Black Taxpayers, Researchers May Have Uncovered Why“
• The Week, “Report: Black taxpayers more likely to face IRS audits“
• The Tax Policy Center, “IRS Audits Of Black Tax Filers, New REIT Rules“
• KPRC, “Study: Black Americans 3 times more likely to face tax audits“

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