Tax Gimmicks

Abstract

Politicians employ gimmicks to hide tax increases from voters. In this paper, we discuss four types of gimmicks. Legislative gimmicks use the wording of the tax law to hide who is being taxed or how much they are being taxed. Economic gimmicks use economic forces to hide who is being taxed and by how much. Communication gimmicks are ways of communicating tax legislation to voters so as to hide the effect or circumstances of tax legislation. Perceptual gimmicks use the voters’ psychologies against them so as to encourage the voter not to be aware of the tax.

Introduction

To get elected, politicians must please voters, and one thing that tends to greatly displease voters is higher taxes. But since government needs tax revenues to pay for government spending, politicians are often forced to vote for higher taxes. To minimize the effect of the increased taxes on their election prospects, politicians employ gimmicks to hide the taxes. In this paper, we discuss four types of gimmicks. Legislative gimmicks use the wording of the tax law to hide who is being taxed or how much they are being taxed. Economic gimmicks use economic forces to hide who is being taxed and by how much. Communication gimmicks are ways of explaining tax legislation to voters so as to hide the effect or circumstances of tax legislation. Perceptual gimmicks use the voters’ psychologies against them to discourage awareness of the tax. Since politicians employ these gimmicks for the purpose of hiding taxes, let us refer to them generically as tax gimmicks.

Politicians rely, at least in part, on special interest groups to fund their campaigns. In 2011, special interests donated almost three-quarters of a billion dollars to political candidates and parties. In addition, lobbyists spent more than $3 billion lobbying Congress and federal agencies.[1] The better hidden is a tax, the better able are politicians to manipulate that tax to benefit favored interests while hiding the manipulation from the voters. The result is often a cycle wherein the lobbyist funds the politician’s campaign, the politician promises the voter more spending but no new taxes, the politician uses gimmicks to hide the taxes that are needed to pay for the spending and, in the process, crafts the hidden taxes to benefit the lobbyists who, in turn, pay for the politician’s next campaign. In short, gimmicks can be used to hide taxes, and, the more hidden the taxes are, the easier it is to raise them.[2] The easier it is to raise taxes, the more valuable lobbying efforts become.

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