Wednesday, April 13, 2011

Why do People Cheat on Their Taxes?

The difference between what the federal government is owed, and what it actually collects is expected to be around $300 billion this year. Why do so many people fail to pay their full tax bill? According to CNBC reporter Stuart Green, it is because Americans do not feel morally obligated to pay the IRS.


    Why and how are so many people avoiding what Franklin thought was a certainty?

    Much of the gap is the result of good faith mistakes by taxpayers — no surprise given the mind-numbing complexity of the tax code.

    But some significant part of the disparity is the result of intentional evasion, non-payment, or underpayment. The question is why. Why are so many Americans willfully and flagrantly violating our tax laws?

    he issue is a complex one, but a few key factors can be identified. One is that the norms associated with the duty to pay taxes are surprisingly weak. Most scholars agree that society’s ability to enforce compliance with the law lies less in the government’s power to impose sanctions than it does in the norms by which people direct their lives.

    Generally speaking, people refrain from committing crimes not because they fear sanctions if they do, but because they believe it is morally wrong to engage in the conduct prohibited.

    In the case of paying taxes, lots of people apparently believe it’s not morally wrong to fail to pay what’s owed. Suspicion of taxes is deeply rooted in our national psyche, going back to the Boston Tea Party of 1773 and the Whiskey Rebellion of the early 1790s.

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