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If you have a a 50% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax income rises 10% to 55% of earnings. If you have a 10% tax
by cjlars 9y ago
If you have a a 50% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax income rises 10% to 55% of earnings. If you have a 10% tax rate and can cut 10% off your tax bill with fancy accounting, your after tax bill rises just over 1% to 91% of earnings. Decisions are made at the margin -- How much effort does it take to keep the extra cash and how much do you get to keep? high rates make tax evasion, legal or not, more worthwhile.
- omegaworks 9y agoThen it's a plain cost-benefit analysis. What you're missing are the three factors at play in cost: 1. The tax rate itself 2. The cost of avoiding it 3. The cost of getting caught We have control of 1 and 3 not just 1, and we can exert influence on 2. The double-Irish hole is closing.
- cjlars 9y agoWho said anything about cost of getting caught? Tax avoidance is expressly defined as taking advantage of the legal options. There are a huge amount of loopholes out there, and a huge amount of effort goes into manufacturing legal ways to qualify for them. The overwhelming bulk of that effort is deadweight loss.