PROTECTION OF TAXPAYER CONFIDENTIALITY WITH RESPECT TO THE TAX MODEL

For over twenty years, the Statistics of Income (SOl) Division of the Internal Revenue Service (IRS) has made available to the public a microdata f i l e of a sample of individual taxpayers' returns (the Tax Model). In the current climate of pro!~osed tax law changes, this has been a valuable tool for researchers to study the effects of proposed laws and also to advance alternative proposals. The data, however, must be issued in such a form that protects the conf ident ial i ty of ind ividua l taxpayers. A d i f f i cu l t problem exists in balancing protection against disclosure with providing data to the public which can give reliable analytical results. As a result of our current research on this issue, we are making several changes to our ]984 public-use f i l e . These changes include removing certain data fields and codes from our f i l e , altering specific codes, modifying our "blurring" process [ ] ] , and subsampling high-income returns. This paper describes the research that was involved in making these changes, and the effects these changes have on disc ] osure and on the stat ist ical integrity of the data in the Tax Mode] f i l e . The paper also includes a brief description and history of the Tax Model, including the importance of the disclosure issue; previous research and f i l e changes; and recommendations for the future.