We calculate the pulse compression in a tapered microstructure optical fiber with four layers of holes. We show that the primary limitation on pulse compression is the loss due to mode leakage. As a fiber's diameter decreases due to the tapering, so does the air-hole diameter, and at a sufficiently small diameter the guided mode loss becomes unacceptably high. For the four-layer geometry we considered, a compression factor of 10 can be achieved by a pulse with an initial FWHM duration of 3 ps in a tapered fiber that is 28 m long. We find that there is little difference in the pulse compression between a linear taper profile and a Gaussian taper profile. More layers of air-holes allows the pitch to decrease considerably before losses become unacceptable, but only a moderate increase in the degree of pulse compression is obtained.