Donald Morris is a Professor of Accounting at the University of Illinois and the author of Opportunity: Optimizing Life’s Chances (Prometheus Books, 2006–Opportunitybook.com), co-author of Accounting Desk Book (Commerce Clearing House, 2005-2011), and has published papers on tax, business ethics, investing, and business strategy. He has a PhD in Philosophy from Southern Illinois University and a Master’s in Taxation from DePaul University in Chicago.
Morris is here today to talk about his latest book, Tax Cheating: Illegal–But Is It Immoral? which I had the opportunity to review this week.
Thanks for this interview. What made you decide to write this book?
The goal of writing about the ethical dimensions of tax cheating grew out of my reaction to a public opinion poll I read in 1999. According to the poll, 87 percent of Americans believe that tax cheating is always wrong. That level of agreement among Americans led me to wonder what forces were at work—was it a high level of patriotism, a belief that the government employs its scarce resources wisely, or an acknowledgment of the value of the tangible and intangible benefits we receive in return for our tax dollars? I wondered how such a distasteful process as filling out a tax return and writing a check to the treasury could possibly strike such a powerful moral chord in that many people.
Who is your target audience?
Individuals interested in tax reform and a tax system that is more transparent and less open to the influence of lobbyists and special interests.
What is it about filling a tax form that strikes such a powerful moral chord in so many people?
I think people are very conscious of being cheated, whether it is being short-changed by a sales clerk, knowing politicians wasting tax funds, or believing that they are paying more taxes because someone else is not paying what the law requires. The belief that we are being cheated, either by other taxpayers or by the government strikes a powerful moral chord in many people.
Why is there so much confusion about taxes?
The income tax system was introduced 100 years ago and it applied to less than five percent of the population. The tax return was a simple one page form. The tax rates were modest, with the highest under ten percent. During the intervening 100 years, Congress has added exceptions and exemptions to make some aspect of the law more fair to some group of taxpayers. With each new Congress, new exceptions were added on top of the old with no attempt to coordinate the overall result. The end-product is a tax law that is complex and which results in most people hiring someone else to prepare their return or purchasing software to help them resolve uncertainty. In attempting to engineer exceptions benefitting increasingly narrow constituencies, Congress has unwittingly produced a law that makes it impossible for anyone to judge if they are paying their fair share or their share plus part of someone else’s.’
What is your definition of tax cheating and how does it differ from tax evasion?
Tax cheating is paying less tax than the rules require and benefiting as a result. Tax evasion is one component of tax cheating but the majority of tax cheating is the result either of not knowing or understanding the complex rules that comprise the tax code or of taking advantage of the tax code’s complexity and self-assessment model to manipulate the rules in one’s own favor. Four thousand individuals a year go to prison for tax evasion. But millions of individuals engage in some measure of tax cheating each year, many (or perhaps most) without even knowing they are breaking the law.
There are many reasons for the growing amount of tax cheating.
- i. Low audit rate—for some, the chances of getting caught are too remote to consider—leading to the “tax audit lottery” mentality.
- ii. Awareness that others are cheating and the perception that the system favors those who are well connected.
- iii. Self-assessment model of reporting is an “honor system” for many and easily abused.
- iv. The tax code’s construction has rendered it incapable of fostering a sense of moral duty to pay the tax; by design it does not appeal to our consciences.
- v. Complexity of the tax laws leads to the inability of anyone to judge if they are paying their fair share of the tax burden.
- vi. Respect for the law is eroded as taxpayers assume others are cheating and that favored classes of taxpayers are provided with tailored tax breaks, not available to all.
In your book, you state that “More than one writer has addressed the ethics of tax evasion, some defending occasions when evading taxes is the morally proper thing to do.” Could you please expand on this, as well as give a couple of examples of these ‘occasions’?
Several authors have written on the ethics of tax evasion. Their arguments are based on extreme circumstances such as the propriety of evading the tax regime of Hitler or other repressive states. The claim is that evading taxes in such situations is morally justified. Others have taken the position that all taxation is stealing by the government so that evading such government actions cannot be morally wrong.
Can the average person fill out a tax form easily or do you recommend hiring an accountant?
The average person whose income is from wages can fill out a tax return, though not always easily. But to ensure oneself that he or she is benefiting from the numerous deductions and credits that have been peppered throughout the tax law, hiring a knowledgeable tax professional is recommended for anyone owning a business and for many people with children in college, who are going through a divorce, or who own a home.
What would you like readers to get out from your book?
Readers should gain a better perspective on what kind of tax reform it would take to make the current system more transparent and make it possible for them to judge whether the tax they are required to pay is their fair share.
Where is your book available?
Amazon, Barnes and Noble
Is there anything else you’d like to add?
Educating yourself about why the tax code is so complex—the result of 100 years of adding special benefits and exceptions that benefit increasingly narrow constituencies—will give you a better understanding of the problem facing lawmakers and a clearer picture of why the system that created the current tax code cannot be expected to reform that system without significant campaign finance reform removing the incentives for adding to the tax code’s complexity each year.
My interview with the author originally appeared in Blogcritics.