Professor Linda Beale: “Brute Force Capitalism” Causes Tax Evasion

Professor Linda Beale: “Brute Force Capitalism” Causes Tax Evasion

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Tax law professor and progressive blogger Linda Beale says that the reason we have tax evasion is because of too much capitalism and not enough regulation. Specifically, Ms. Beale objects to the following statement made by a New York Times Magazine author she refers to only as Adam D:

One often-overlooked lesson of the financial crisis is that shenanigans don’t happen in the absence of regulation; they happen when regulations are exceedingly complex and involve confusing, overlapping regulatory authorities.

Here’s Beale:

Shenanigans happen in brute force capitalism–the kind we’ve had in place for the last few decades–until there is one dominant beast who controls everything. Regulations ain’t the cause.

Illegally hiding ones money in an offshore account to evade taxes has nothing whatsoever to do with capitalism, brute or otherwise. In fact, it is anti-capitalist to shelter one’s capital to evade taxes because it gives the shelterer an unfair competitive advantage over his marketplace rivals. What tax evaders are doing, then, is a perversion of capitalism, not capitalism itself, in much the same way Islamic terrorists practice a perversion of Islam. To denigrate capitalists for the sins of perverse capitalists is no different than denigrating Muslims for the sins of perverse Muslims.

The truth is that the dominant beast that slouches toward Bethlehem to be born isn’t capitalism, but rather statism. The former at least is subject to the checks and balances of free market competition, however imperfect those checks and balances may be. Statism, or big government, has no competition and, therefore, is in an actual position to control everything as was recently demonstrated by the  King Mayor of New York when he made it a crime to purchase a Big Gulp.

I am a little surprised that Ms. Beale takes exception to Adam D’s observation that “exceedingly complex” and “confusing” regulations create a climate for tax shenanigans. Surely she is not in favor of such regulations, as her repeated calls for tax simplification and tax reform would suggest.

Adam D is calling for the simplification and centralization of regulations, not their eradication. What’s so objectionable about that?

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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Comments

  1. Thank you Peter for providing clarity. I am a CPA and prepare many individual and corporate returns. Most people file and pay their taxes. I have many clients whose tax payments are several times my annual income. Capitalism works. Statism and socialism result in the misallocation of scarce resources. I tire from armchair socialists criticizing our great country. Go live in Russia if you want more regulation.

  2. Doug Thorburn says:

    Actually, please tell Linda, a belief that “the rules don’t apply to me” is at the root of tax evasion, just as it is for nearly every felony. The question is, from where does that belief come?

  3. I left a comment on her blog for the above referenced post. It contained no profanity, nor was it off topic.

    Her response: “Comment has been removed by moderator.”

    This is how authoritarians behave.

  4. Linda has been very fair to me and posts all my comments. What exactly was your comment?

  5. I wrote that taxes, like government itself, is a necessary evil. But, that if the rates become too high and the things being funded by the high rates are unpopular (e.g., Obamacare, welfare for illegal aliens, all of the oppressive regulatory agencies, etc.), then the perceived benefit of avoiding the tax becomes greater than the threat of prosecution.

    I then asked why people on the Left seem to be able understand that marijuana prohibition (i.e., a type of government meddling that leads to a great deal of harm) has many foreseeable consequences, yet, the same people refuse to look at the totally foreseeable consequences of their draconian tax policies (i.e., another type of government meddling that leads to a great deal of harm).

  6. One thing is certain, higher tax rates can lead to tax evasion since there is more incentive to cheat, so a balance has to be obtained.