Verified Document

Economic Analysis Of Tax Evasion Law Research Paper

Soyoung Kayla Kim Law and Economics

Economic Analysis of Tax Evasion

The taxation system in the United States is highly complex and growing more so each year, with a mass of different types of taxes. The issue of tax reform arises in every election season in the United States as politicians try to reassure as many voters as possible that they will pay the least possible amount of taxes (while still receiving all of the services that they find valuable!). But beyond the issues of how much in taxes it is fair and reasonable to expect people to pay and what services should be provided by the government and so funded with taxpayer contributions is the question of tax evasion. The current tax codes in the United States are complex to the point of opacityso far from being clear that there is far too much room for people to avoid paying taxes that they are legally required to do. This paper examines the ways in which people avoid paying income tax that they legally owe. Comment by James Miller: To vague.

Not only does this tax evasion starve the government of moneyreduce the amount of money that the government takes in to use that it needs for legitimate services such as providing medical care for the elderly and safe schools for the young, but it creates an atmosphere in which people do not feel that they need to respect their own government. This paper looks at the problem of tax evasion in the United States, including its causes, the harm that it does, and possible ways in which this situation might be remedied. Comment by James Miller: Considering how much money the government takes in starved is not the appropriate word but rather tax evasion reduces the amount of money that the government takes in. We

It is important to begin with a definition of tax evasion. Not all attempts to avoid paying taxes constitute tax evasion, which is a felony under both federal and state law in the United States. Indeed, tax avoidance is both perfectly legal and even encouraged by government agencies in that it is the legal use of the tax code to an individual's (or company's) advantage....

Government agencies, including the primary federal tax agency, the Internal Revenue Service (IRS) do not expect anyone to pay more in taxes than are legally owed and therefore fully support individuals reducing their taxes by whatever means are available to them. In this way, tax avoidance can be considered to be like a speed limit: The government can sanction or punish an individual if he or she drives even one mile over the speed limit, although in all likelihood someone will not get a speeding ticket unless they are speeding a fair amount over the limit. However, so long as one is going exactly the speed limit or below, the government will not intervene.
Gregory v. Helvering

The basic principle that taxes can be avoided but not evaded (that is, that individuals can use any means available to them to legally reduce their taxes but not a cent below this) was outlined in a 1935 U.S. Supreme Court decision, Gregory v. Helvering, 293 U.S. 465. This landmark decision has been instrumental over the last four generations in setting U.S. income tax law. The ruling reads in part:

It is earnestly contended on behalf of the taxpayer that since every element required by [the statute] is to be found in what was done, a statutory reorganization was effected; and that the motive of the taxpayer thereby to escape payment of a tax will not alter the result or make unlawful what the statute allows. It is quite true that if a reorganization in reality was effected within the meaning of [the statute], the ulterior purpose mentioned will be disregarded. The legal right of a taxpayer to decrease the amount of what otherwise would be his [or her] taxes, or altogether avoid them, by means which the law permits, cannot be doubted. [ . . . ] But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. The reasoning of the court below [i.e., the reasoning of the Court of Appeals] in justification of a negative answer leaves little to be said. Gregory v. Helvering, 293 U.S. 465

The ruling continues to delineate…

Cite this Document:
Copy Bibliography Citation

Related Documents

Tax Law the Nature of
Words: 3529 Length: 8 Document Type: Term Paper

With regard to the salaried people the federal tax system has improvised a method to flush the surplus spending funds in advance by the mandatory provision of requiring employers to withhold tax from payments in advance which on remitting will be computed as part of the total tax liability of the employee. This method of advance collection is an important feature said to be the pillar of the tax

Tax Loophole Income Tax Foreign
Words: 2515 Length: 8 Document Type: Research Paper

S. domestic law, a U.S. citizen or resident (Non U.S. person) who is a beneficiary of a foreign retirement plan would be subjected to the existing U.S. income taxation on all of the income that is accrued in their foreign investment plans even though their income is never currently distributed per se to the beneficiary. This should be the case unless the foreign retirement plan accounts as the employee's trust

Benefits of Flat Tax Over Progressive Tax Policy
Words: 4659 Length: 16 Document Type: Term Paper

Flat Tax over the Current Tax Policy The focus of this paper is to demonstrate effectiveness of flat tax over the current tax rate. Presently, the U.S. government employs progressively tax law as the current tax policy. Under the current tax policy, the government increases taxes with increase in income. Analysis of the current tax policy reveals that the tax system is very complicated to understand because corporate organizations face multiple

Offshore Tax Havens by U.S.
Words: 3756 Length: 12 Document Type: Thesis

The other side of this is that the companies have to spend finances in areas of language training or job training when they outsource. However, over the years, many U.S.-based companies haven't been discouraged by these additional costs because the overall costs of outsourcing with the job training session and language teaching and outplacement requirements are still far less when compared to the costs that they would have to endure

European Economic Crisis Greek Government
Words: 4697 Length: 15 Document Type: Term Paper

European Economic Crisis -- Greek Government This paper provides a deep insight into the European economic crisis and the events which eventually lead up to Greece debt crisis. It explains the causes which were responsible for the chaotic and poor financial situation currently prevalent in Europe. It also analyses the current tools used for stabilizing the situation in Greece and the shortcomings in them. It also highlights certain steps and measures

Companies and Offshore Tax Havens
Words: 2452 Length: 9 Document Type: Thesis

This is a major part of the total "tax gap," the amount of unpaid taxes owed by individuals, corporations, and other organizations, which is estimated by the Internal Revenue Service (IRS) to be $345 billion. Tax havens have been used by American businesses for many years, and many commercial banks have successfully prevented legislation to stop tax haven activities (Francis, 2008). This is primarily because banks make money by placing

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now