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Friday, May 11, 2012

Tax Cheating: Illegal -- But Is It Immoral?

Tax CheatingDonald Morris (University of Illinois-Springfield, Department of Accounting), Tax Cheating:  Illegal -- But Is It Immoral? (SUNY Press, June 2012):

From unreported gambling winnings and inflated claims of the value of clothing donated to charity to money hidden in Swiss bank accounts and high-profile tax schemes plotted by celebrities and business leaders, the range of tax cheating opportunities is wide and the boundaries and moral status can be hazy. Considering the behavior of individuals and small businesses as well as the involvement of congress and the IRS, Donald Morris combines insights from law, psychology, sociology, criminology, accounting, economics, and philosophy to examine the ethical issues surrounding tax cheating and implications for tax policy.

“Morris gives us a thorough collection of thoughts and quotations about a sensitive subject—how do morals and ethics affect the completion of a tax return? Who is more unethical, Congress in writing the current tax law or the taxpayer in paying ‘too little’ tax? What motivates a citizen to ‘volunteer’ to pay a tax bill?  Does Congress really want to close the tax gap? Should a court apply only the letter of the law in a tax case, or should a higher moral principle also apply? By approaching the term ‘cheating’ in a morally neutral manner, Morris removes much of the baggage that restricts the usual talk about taxes—the book allows for a more fruitful review of the economics of the deal between the citizen and the government, that we call taxation. Intriguing, fresh, accessible, up to date.” — William A. Raabe, coauthor of Federal Tax Research, Ninth Edition

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About as immoral as refusing to pay a mafioso's "protection fee" when he comes to your store and demands it.

Posted by: anon | May 11, 2012 5:46:57 AM

For questions like these, I usually defer to those with greater expertise and impeccable character, such as Timothy Geithner and Charles Rangel.

Posted by: Anon2 | May 11, 2012 8:49:37 AM

If the author suggests under-paying taxes, for whatever reason, is "cheating," than the treatment is not neutral. Cheating is a word that carries great linguistic and ethical baggage. Trying to position "cheating," as "neutral," is dishonest.

Perhaps, "Underpaying Taxes: Illegal-But is it immoral?" would be a better starting point.

Posted by: Gerard W. O'Brien | May 11, 2012 9:40:26 AM

I'll never forget seeing the chairman of the Ways and Means Committee on TV about 40 years ago saying something like we know everyone cheats on taxes so we set the rates accordingly. In other words if you don't cheat you're overpaying!

Posted by: MarkInFla | May 14, 2012 6:16:21 AM

When discussing this with a liberal, ask her to imagine owning a store where many customers pay cash. Would she report every penny to the tax authorities? Now suppose she found out that her competitor next door and his whole family, who suddenly disappeared two years ago, were gassed to death by the same democratically elected government she's been paying taxes to. Tax cheating is still illegal (and severely punished!), but is it immoral?

Congress isn't building gas chambers yet, but they crossed the line from Stupid to Evil when I saw cars much newer and nicer than mine being destroyed in "cash for clunkers". The Ku Klux Klan or NAMBLA could spend our tax dollars more wisely than that!

Posted by: Dave | May 14, 2012 7:19:33 AM

Taxation is theft. You can't cheat a thief. Protecting your property from thieves is not immoral.

Posted by: SteveP | May 14, 2012 8:34:39 AM

The "deal" between the citizen and the government?

You mean, "Hand over $X for us to spend as we please, and we won't throw you in prison?"

THAT deal?

Posted by: BarryD | May 14, 2012 8:44:21 AM

'About as immoral as refusing to pay a mafioso's "protection fee" '

Good answer.

Congress hasn't passed a budget in three years. It's not clear to me why federal tax collection itself is at all legitimate.

Posted by: djmoore | May 14, 2012 9:54:40 AM

Is it cheating when Congress writes tax laws which state a marginal tax rate of x% but which use AMT, limitations, and phase-outs to increase that rate in ways and amounts that are hidden from the taxpayer? Or is that merely creative legislating?

Is it cheating when companies arrange their transactions to minimize taxes using techniques that have no other business purpose? Or is that merely creative accounting?

If your answers to these two categories don't match, you have some 'splainin' to do!

At a time when the tax code needs to be cleansed of dirty tricks, every major proposal to close the fiscal gap seems to add more of these minimum taxes, limitations, and phase-outs. What's wrong with openly and honestly stating the actual marginal tax rates?

I hope this book advances the discussion of the need for Congress to legislate in good faith. It's only human nature to enjoy returning treachery for treachery: Check out and see if you can suppress a grin.

Posted by: AMTbuff | May 14, 2012 11:09:58 AM

This is pretty clear. The law of the land is the Law. You don't lie and you don't cheat. Tax planning and tax avoidance are neither.

Also, there is nothing "immoral" about adopting favorable interpretations of ambiguous laws. That's what courts are for.

Posted by: Lou Gots | May 15, 2012 2:51:19 AM