HAT Manifesto Part 1/3 - Rubric Cube - 241201 revision

 Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 4 The Economics of the Public Sector

Chapter 12 of 36 The Design of the Tax System

Section 14 of 22

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Part of the inefficiency of a tax system is the administrative burden, including

· time and money spent yearly prior to April 15 tax day by taxpayers filling out tax forms due to federal and state governments

· time spent throughout the year keeping records for tax purposes

· resources used by government to collect taxes and enforce the tax laws

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Many taxpayers hire accountants and tax lawyers to help with their taxes, these experts fill out the tax forms for their clients and help their clients arrange their affairs to reduce the amount of taxes owed.

Critics of our tax system say these advisers help their clients avoid taxes by abusing the “loophole” detailed provisions of the tax code.

These loopholes in some cases are unintended, arising from ambiguities or omissions in the tax laws.

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More often loopholes arise because lawmakers give special treatment to specific types of behavior.

The U.S. federal tax code gives preferential zero or low tax treatment to municipal bonds investors.

This is because Congress wants to make it easier for state and local governments to borrow money.

This provision benefits states and localities, and helps high-income taxpayers avoid taxes.

What looks like a loophole to one taxpayer looks like a justifiable tax deduction to another.

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create a loophole

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