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The sensitivity (i.e., elasticity and built-in flexibility) of the U. S. individual income tax to changes in national income is of great interest to researchers and policymakers. However, the direct measurement of this sensitivity—that is, the measurement obtained from time-series observations of the relevant variables—has always been difficult, and even at times impossible, because changes in the legal structure of the tax have been too frequent to provide enough observations that relate to the same legal structure to allow statistically significant coefficients to be determined. This was particularly true in the United States before 1954, when the rates were changed frequently; it has also been true since 1963, when important changes occurred in rates, personal exemptions, deductions, and other features. In contrast, during the period between 1954 and 1963, hardly any significant statutory changes occurred in the tax.
THE FATE that an author should dread the most is to see his/her writings ignored. While I have experienced this fate with some of my writings, this is definitely not what has happened to my articles on the underground economy in the United States. For these I have been “flattered” by more attention than I would perhaps have liked. The three comments and criticisms discussed here are quite different: they deal in part with the methodology of my work in this area and in part with the empirical results. There are several ways in which I could deal with them but perhaps the simplest is to take the authors’ comments alphabetically. I shall allocate far more space to Feige’s “comment” than to the other two, largely because his is not just a comment on my paper but is also an attempt to “sell” his work to the readers of Staff Papers. Thus, I must inevitably discuss his method and results while attempting to answer his specific criticism of my work.