A Stitch in Haste

Tomorrow is the deadline for cheating on your tax returns contributing to the "tax gap."

The "tax gap," to review, is the euphemism for the fact that individuals under-report their income, overstate their deductions and exemptions, or both. There has been much recent grumbling, mostly by Democrats, about the "tax gap." As I demonstrated in a previous post, this is actually somewhat counterintuitive, since the "tax gap" is mostly attributable to blue-collar, low-skilled and unskilled workers (and small businesses), and not to the "rich," or to "greedy" corporations (such as Hillary Clinton's favorite "undertaxed" entity — Big Oil).

A major article in today's Washington Post reinforces this empirical truth:

Judging from his tax returns, Dinh Kim Huynh wasn't getting rich in the manicure business. In 2000, Huynh and his wife claimed taxable income of just $7,578 from their two nail salons in Southern Maryland — so little that they qualified for a tax credit for the working poor. Their tax bill was $195.

But like millions of American business owners who trade primarily in cash, Huynh was not altogether honest with the Internal Revenue Service. When IRS agents poked around, they discovered four cars in Huynh's name, including a $77,000 Mercedes; receipts for diamonds and Rolexes in a closet at his Waldorf home; and a videotape of Huynh flashing a five-carat ring during the purchase of yet another vehicle at a local Honda dealership, court records show.
...
In 1985, taxpayers were told to name dependents on whom they wanted to claim deductions and list their Social Security numbers. "Lo and behold, we lost five million-plus children who never existed," said Donald C. Alexander, IRS commissioner at the time.

Neither Microsoft nor Berkshire Hathaway can significantly under-report their income — that was true even before Sarbanes-Oxley. And I seriously doubt that Bill Gates or Warren Buffett ever considered listing phantom children on their tax returns. These are the shenanigans of the middle class, the working poor, and the small business owner. People whom the Democrats claim to champion — when they're not siccing the IRS on them.

It's quite simple, really: Keep taxes low, and the "tax gap" will take care of itself. Remove the incentive to cheat, and the cheating will stop.