Higher tax liabilities heighten evasion---that wastes IRS resources
Pomerleau 21, a climate policy analyst at the Niskanen Center. Her areas of research include policy development for carbon taxes. She has previously worked in public policy at the Cato Institute and the American Council on Renewable Energy. Most recently, she has worked as a business strategy consultant. Shuting has an MPP in environmental and energy policy from Georgetown University’s McCourt School of Public Policy (Shuting, “Administrative Costs of a Carbon Tax,” https://www.niskanencenter.org/wp-content/uploads/2021/02/Jan28-Administrative-Costs-of-Carbon-Tax.pdf)//BB
Other features of the tax code can indirectly impact administrative costs. For example, higher tax rates and overall tax burdens can indirectly increase administrative costs. Larger tax liabilities and higher tax rates create more incentives for taxpayers to evade paying tax and require the government to allocate resources to reducing tax evasion.15
See FN15. Smulders et al., “The Case of Carbon Taxation.”; Gale et al., “Administrative Issues in Tax Reform.”
Levying a new tax on a base that is being taxed by existing taxes rather than enacting an entirely new tax would reduce administrative costs, especially the fixed costs required to set up the new tax. The new tax could piggyback on the existing tax’s administrative system to collect tax payments.16