April 16, 2012

The Gimmicks Government Uses to Tax You

Antony Davies

Senior Affiliated Scholar
Summary

From the average taxpayer's perspective, tax day is already a lottery—just one that takes hours to play and requires that you hire an accountant to scratch off the numbers.

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This excerpt originally appeared in US News and World Report

To make tax day more fun, let's replace the tax code with a national lottery. The IRS can issue scratch-offs to each household. Winners get rebates and losers have to cut the IRS a check. The tax code is so complex that most people already have no idea whether they will get money back or owe the government more. From the average taxpayer's perspective, tax day is already a lottery—just one that takes hours to play and requires that you hire an accountant to scratch off the numbers.

For taxpayers, complexity makes the tax code a lottery. For politicians, complexity is a fog that hides the true nature of tax policies. For example, politicians told us that the Alternative Minimum Tax was going to be a tax on the rich. But, because the Alternative Minimum Tax was not indexed for inflation, today it hits many middle-class households. Sleights of hand like this are called tax gimmicks. Tax gimmicks give politicians political cover by allowing them to hide what they are doing to you.