Tax Reform is the Best Way to Reduce Tax Evasion

A column in the Pittsburgh Post-Gazette reviews new academic research indicating that high tax rates encourage tax evasion. Most politicians think the solution is more power for the IRS, but the columnist points to ideas that are much more likely to work and much more consistent with the protection of a free society. First, shrink the size of government so that taxpayes are less likely to be angry about grotesque examples of waste, fraud, and abuse. Second, adopt a simple and fair system such as the flat tax:

The pressure to cheat, Dr. Antenucci said, comes from the big payoff. “The top tax rate is 35 percent. In this investment investment environment, people scratch to make a 5 percent to 8 percent return, and there is 35 percent sitting right there.” …”When people read about a $500 coffee pot being sold to the government, people don’t want to pay their taxes,” he said. …The professors advocate attacking the problem on several fronts. First, create a tax system where cheating is extremely difficult. One way would be to switch to a flat tax or national sales tax.