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To the latter part of top post, for a billionaire utility value and expected value are equal as if he gains or loses a few million it doesn't matter. For smalle

To the latter part of top post, for a billionaire utility value and expected value are equal as if he gains or loses a few million it doesn't matter. For smaller player they can be completely different, yes a few thousand can be a good income gain, but getting caught can mean they get completely ruined. So if expected value of tax cheating in vacuum is - lets imagine - 20% of the amount of taxes cheated, billionaire should cheat on taxes in every situation, as they simply gain 20% on average. Smaller player shouldn't, as even though their expected value is the same, their utility value can be completely different as they might take a risk of ruining their business and losing future income and hugely lowering their quality of life. edit: and also for small amounts the way down is much harsher on the utility value, so being a favorite to gain 10k might not be worth it, if the possible -15k means your lifestyle suffers.

caseysoftware 6y ago
I think you're leaving out enforcement costs. If you're little and scamming a few $k here and there, the ROI (Return on Investigation) for the IRS to go after you is tiny. It's probably not worth assigning an investigator. If you're HUGE and scamming billions, the ROI is there but you also have the capabilities to defend yourself, obfuscate things, etc so it's unlikely they can destroy you. Therefore, it's not one investigator but a team with forensic accountants, potentially informants, etc. For everyone else, the danger is in the middle. Where you have enough that you can lose a life-destroying amount but you don't have the means to protect yourself. That is a great target for investigators. In short, as you gain more, be careful and have a good accountant who follows the rules to the best of their ability.. until you can make the rules. Oh crap.

caseysoftware 6y ago

I think you're leaving out enforcement costs. If you're little and scamming a few $k here and there, the ROI (Return on Investigation) for the IRS to go after you is tiny. It's probably not worth assigning an investigator. If you're HUGE and scamming billions, the ROI is there but you also have the capabilities to defend yourself, obfuscate things, etc so it's unlikely they can destroy you. Therefore, it's not one investigator but a team with forensic accountants, potentially informants, etc. For everyone else, the danger is in the middle. Where you have enough that you can lose a life-destroying amount but you don't have the means to protect yourself. That is a great target for investigators. In short, as you gain more, be careful and have a good accountant who follows the rules to the best of their ability.. until you can make the rules. Oh crap.