Is tax loopholing wrong?

Robin Hanson thinks so.

In the movie Bubble, a woman visiting a man's room waits until he goes to the bathroom, and then searches for cash, which she finds and keeps. Abstractly I understand why someone might do this, but I would feel completely ashamed to do it. It is not just that such theft is uncommon or illegal, or that I had a connection to the victim; I would feel ashamed even if it were legal, if most everyone did it, or if the victim were a stranger. And I suspect most people feel this way.

I feel the same strong sense of shame about tax loopholing - the act of working to find a way to present myself on my tax form so that I pay less taxes. The very idea revolts me, and I just can't bring myself to do it. But here I seem to be unusual - most people I know seem proud to find better tax loopholes.

Judge Learned Hand (arguably the bearer of the coolest name in legal history) was of a different opinion:
Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes[. . . . ]

I will concede the point that the practice of tax loopholing is socially wasteful, however this in itself is not enough to make it morally repugnant. Driving your car during rush-hour is socially wasteful too, as is playing defensive (and thus boring) football in order to wrestle victory from a superior opponent. In free, democratic societies you are allowed, and expected, to pursue your personal interest in so far as you 'play by the rules' - and that's the way it should be. In my opinion, there's nothing natural or moral about paying more to the government than your fair share, as defined by tax law.

To take the argument a step further, does Robin think that those who opposed the Bush tax-cut and didn't donate their rebate to the government are morally bankrupt?

by datacharmer | Sunday, April 22, 2007
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