High tax rates prompt people to spend money on the tax lawyers and finance wizards who design those skillful evasions. For the lawyers and the finance guys, this is a boon. But for the overall economy, it’s a significant loss. The money these taxpayers spent on legal fees and complicated financial constructions could have been invested in ways that

Corporate tax revenues are plummeting partly because Congress has larded the corporate income tax with costly preferences and giveaways for corporations, and partly because American multinationals have become so successful at shifting income overseas. Hundreds of millions of dollars—money that might have gone to raising wages, or creating new

When it comes to designing a country’s tax system, the World Bank, the IMF, and the OECD all preach the same sermon, relying on the same fundamental principle. This rule is not particularly complicated; it is easy to understand, although not always easy to implement. In fact, it’s so simple that the economists generally reduce the essential formula

Franklin Delano Roosevelt, no friend of those in the upper brackets, observed in 1935 that “tax avoidance means that you hire a $25,000-fee lawyer, and he changes the word ‘evasion’ into the word ‘avoidance.’”

The Panama Papers indicated that the law firm created some 214,000 shell corporations—legal entities that had no employees, no officers, and no corporate activity except to serve as a clandestine repository for the money of wealthy tax dodgers. Sometimes, the firm put the money into “charities” or “foundations,” which can also be used to hide

Countless other countries like ours—advanced, high-tech, free-market democracies—have found ways to collect the tax revenues they need without imposing long hours of tedious labor and large tax-preparer fees on their citizens. Their parliaments and their tax collectors are no smarter than their counterparts in the United States. The difference is,

An American couple bringing in the median family income—about $55,000 per year—and taking the standard deduction will pay about 15% of their annual earnings in personal income tax, another 6.5% in Social Security tax, another 2.9% for the Medicaid tax, and roughly 5% in state income tax. In addition, an average American family will pay 5% to 10% of

For the U.S. personal income tax, fixing the whole damn thing means that the whole boatload of exemptions, exclusions, and tax-free income clauses should be jettisoned. If the employer pays part of a worker’s health insurance premium, that’s a fine thing, but the payment should be taxable income to the worker. If a taxpayer decides to buy a

If you happen to be browsing through the statute books some restless night, you can find the anti-complexity clause in Subsection IX of subpart (ii) of Section 7803(c)(2)(B) of the Internal Revenue Code.