Don't Mess With Taxes

That's not a question most of us ponder every day, but a Rutgers law professor recently tackled the topic. (Hat tip: TaxProf)

At a University of Houston symposium last month on tax crimes, Stuart P. Green examined why some folks find themselves thinking about, and committing, tax evasion. Or in tax prof speak, why the norms against tax evasion are so unstable.

Green offered 10 reasons. Those that caught my eye in the abstract at the Social Science Research Network are:

• Tax evasion is difficult to distinguish from tax avoidance.
• The level of enforcement is low.
• Enforcement practices are arbitrary and uneven.
• The tax code is perceived as unfair and tax revenues are thought to be misused.
• Taxes are demonized in our political culture.
• There is a sense that "everyone else is doing it."

Green also offers some suggestions on how to solve the tax evasion problem. They include simplifying the tax code, "making clearer the distinction between lawful and unlawful behavior (though we should recognize how difficult this would be, particularly in the context of taxes paid by large businesses)," modifying government spending priorities and changing our political rhetoric.

In connection with that last point, Green says we need to educate people about the importance of tax revenues. He does a good job of that in his conclusion:

"I believe we need to recognize that failing to pay taxes constitutes disobedience in a sense that merely failing to comply with other laws does not. Taxes are the fuel that runs the engine of liberal democracy.

Paying taxes may or may not be a patriotic act – that depends on how one defines patriotism. But it is certainly a duty of citizenship, one with arguably more significance than complying with many regulatory laws. As Stephen Holmes and Cass Sunstein have argued, if legal rights are to be considered meaningful, the existence of a government is required first to establish and then to enforce those rights.

Running a government is costly; paying taxes is necessary in order to support the communal infrastructure by which individual rights are upheld."

Or as another Holmes, Supreme Court Justice Oliver Wendell Holmes, Jr., famously put it: "I like paying taxes. With them I buy civilization."

Related posts:

• The good side of taxes
• What's up with tax havens?
• Famous tax cheats of 2008