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Top scientists: Tax Simplification fights fraud!

October 26, 2009

Science provides support for the intuitively obvious, according to the latest work out of Australia:

Queensland University of Technology visiting Professor James Alm said economics experiments showed that a simple tax system led to more honest reporting in tax returns and thus greater revenue.

"This experimental finding is further borne out in real life - countries that have removed complicated deductions and credits have found not only that they got more honest reporting but they had also gained a wider tax base," said Professor Alm, an economist from the Andrew Young School of Policy Studies at Georgia State University, whose research is funded by the US Internal Revenue Service.

Unfortunately, while tax simplification is only good for all of us, it is hell on the Iron Triangle of lobbyists, legislative fund-raisers, and those who have learned to game the system at the expense of the rest of us.

This bit is interesting:

He said a series of experiments that mimicked the naturally occurring environment had shown that, when completing their tax return roughly 50 per cent of people are always honest, 20 per cent always cheat and about 30 per cent are sometimes honest and sometimes not, depending on situational incentives.

I think that's true to a point, but when people lose confidence in the system entirely, the compliant 50% will also give up if they feel like fools for following the rules.

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