How do people avoid their taxes

Reader comment on: Tax Rates and Tax Evasion

Submitted by ben (United States), Feb 22, 2010 11:21

I don't think that tax avoidance and tax evasion are the same for the purposes of public policy. When a person evades taxes he pockets the money, and can do whatever he/she would like. Tax avoidance schemes often result in some sort of public good. Charitable giving, higher education, health care expenses etc are all social goods. If a person has his taxes increase, he may increase his charitable giving in response, which is a tax avoidance, but still has a benefit to the museum, Church, University etc (I would be curious to know the breakdown of where the dollars go when people avoid paying taxes). I would advocate a simplified tax system that eliminates such loopholes to make it harder to avoid taxes. I would also think that the some kinds of taxes are more easily avoided than others. A VAT is probably harder because the avoidance would have to be a business, not a person. As the paper you cited shows, money that flows through a business is much less likely to go undeclared and evaded than independent income.

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