3/29/2005

Free Riders of All Classes

An article by ABC News at abcnews.go.com/Business/wireStory?id=624158 shares the estimated lost revenue to the IRS by those who underreport their taxable income. The numbers are astounding- a whopping estimate of $300 billion a year. That is more money than government spending on Medicaid for a year! The IRS was able to recover only about $50 billion of that lost revenue last year. Without regard to ethics, is it better for the economy for that money to be in the hands of the private sector than to be paid to the government? After all, the government transfers a lot of that money back to individuals and corporations anyways. That seems to be a popular belief if so many people are doing it.

1 comment:

Dr. Tufte said...

-1 on Scott's post for a poorly formatted link.

I don't want to be a party-pooper here, but I don't think it's very important macroeconomically if anyone cheats on their taxes. Obviously, I don't want to encourage illegal behavior. But the fact is, the government can recoup that money easily and painlessly by borrowing from the public. Pay the right rate of interest, and every one of those tax cheats will put the money in the hands of the government.