An Interview with Tax Ethics Researcher Robert McGee

Robert McGee has been researching the ethics of tax evasion for over a decade now, through surveys, interviews, and reviews of the existing literature. His findings are provocative and controversial. I have had an opportunity to ask Mr. McGee some questions about his research, and I share his answers here:

The Picket Line: Could you first give us a thumbnail sketch of your research into the cross-cultural philosophy of the ethics of tax evasion and your international surveys of present-day opinions about the ethics of tax evasion?

Robert McGee: Several years ago I wrote an article on the ethics of tax evasion. It was published under the title “Is Tax Evasion Unethical?” [University of Kansas Law Review, Vol. 42, No. 2 (Winter, 1994), 411–35.] A slightly different version of that article was posted on the Social Science Research Network website. The abstract can be found at http://ssrn.com/abstract=74420. You can download the full article by hitting the download button.

That article was partly based on a 1944 doctoral thesis written by Martin Crowe, a Catholic priest, who researched 500 years of theological (mostly Catholic) literature on the ethics of paying just taxes. His research showed that the same basic questions and arguments had been popping up over the centuries. He found that tax evasion was sometimes viewed as ethical, although scholars could not agree on the specifics.

I decided to do some research to expand on the Crowe thesis, so I asked scholars from different religious perspectives to write a paper on the ethics of tax evasion from their religious perspective. I received positive replies from various Jewish, Muslim, Christian and Baha’i scholars. Their manuscripts were later published in the Journal of Accounting, Ethics & Public Policy and as chapters of an edited book titled The Ethics of Tax Evasion (Dumont Institute 1998). Their views are summarized and critiqued in the following articles of mine:

McGee, Robert W., “The Ethics of Tax Evasion and Trade Protectionism from an Islamic Perspective”. Commentaries on Law & Public Policy, Vol. 1, 1997. Available at SSRN: http://ssrn.com/abstract=461397
McGee, Robert W., “Christian Views on the Ethics of Tax Evasion”. Journal of Accounting, Ethics & Public Policy, Vol. 1, No. 2, Spring 1998. Available at SSRN: http://ssrn.com/abstract=461398
McGee, Robert W., “Jewish Views on the Ethics of Tax Evasion”. Journal of Accounting, Ethics & Public Policy, Vol. 1, No. 3, Summer 1998. Available at SSRN: http://ssrn.com/abstract=461399
McGee, Robert W., “Is It Unethical to Evade Taxes in an Evil or Corrupt State? A Look at Jewish, Christian, Muslim, Mormon and Baha’i Perspectives”. Journal of Accounting, Ethics & Public Policy, Vol. 2, No. 1, pp. 149–181, Winter 1999. Available at SSRN: http://ssrn.com/abstract=251469

If one were to summarize the various religious views, one could generalize by saying that Mormons and Baha’is think tax evasion is always unethical, Jews believe tax evasion is always or almost always unethical (the two Jewish scholars who wrote papers were in basic agreement that tax evasion is always unethical but I found another Jewish scholar who thought there might be some room for fudging a bit), other Christians think tax evasion may be ethical under certain circumstances and Muslims think tax evasion is ethical if the tax is based on income or if the tax raises prices (like sales taxes, value added taxes or tariffs do). But other Muslim scholars disagree with this view and take the position that tax evasion is always unethical.

I later summarized these views as well as various secular views, in the following paper:

McGee, Robert W., “Three Views on the Ethics of Tax Evasion” (November 2005). Andreas School of Business Working Paper. Available at SSRN: http://ssrn.com/abstract=841526

Basically, this paper summarizes and critiques the literature on the three main views, that tax evasion is (1) always unethical, (2) sometimes unethical, or (3) never unethical. These positions are also critiqued in my book, The Philosophy of Taxation and Public Finance (Kluwer 2004).

I also did a study asking Armenians why they evade taxes. That study can be found at:

McGee, Robert W., “Why People Evade Taxes in Armenia: A Look at an Ethical Issue Based on a Summary of Interviews”. Journal of Accounting, Ethics & Public Policy, Vol. 2, No. 2, Pp. 408–416, Spring 1999. Available at SSRN: http://ssrn.com/abstract=242568

A few years later I expanded on this research by conducting surveys on the ethics of tax evasion in a number of countries. Basically, the surveys consisted of (usually) 18 statements that began, “Tax evasion is ethical if….” Respondents were told to insert a number from 1 to 7 in the space provided to indicate the extent of their agreement or disagreement with each statement. I then ranked the 18 arguments for tax evasion from strongest to weakest. The results showed that:

There is a widespread belief that there is a duty to pay taxes,
Some arguments for tax evasion are stronger than others,
The results are different for different countries,
The results are sometimes different for different subsets of the population — business professors, business students, law students, philosophy students, males v. females, Caucasians v. Hispanics, etc.

Some results were surprising. There was widespread support for the position that Jews living in Nazi Germany had an ethical duty to pay taxes to Hitler.

I might mention that this research is not yet completed. I am continuing to conduct surveys of sample populations in different countries. The results are posted on the Social Science Research Network website www.ssrn.com as they become available. Readers can find the links to these studies at http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=2139. As of the date of this writing the following surveys have been posted:

Argentina: http://ssrn.com/abstract=875892
Armenia: http://ssrn.com/abstract=878396; http://ssrn.com/abstract=869309
Bosnia: http://ssrn.com/abstract=899609
China: http://ssrn.com/abstract=869280; http://ssrn.com/abstract=869304
Guatemala: http://ssrn.com/abstract=813288
Guatemala vs. U.S.A. (comparative study): http://ssrn.com/abstract=892323
Hong Kong: http://ssrn.com/abstract=869306
International business academics: http://ssrn.com/abstract=803964
Macau: http://ssrn.com/abstract=890355
Poland: http://ssrn.com/abstract=875434
Romania: http://ssrn.com/abstract=813345
Ukraine: http://ssrn.com/abstract=875437

About 20 more studies are in progress.

The Picket Line: What led you to this area of research? Are you a tax resister?

Robert McGee: It seems that I have always been interested in taxation and the ability of governments over the centuries to extract taxes from the citizenry and their success in convincing the citizenry that they have a moral obligation to pay. One pivotal event in this intellectual curiosity came while reading Yes I Can, the autobiography of Sammy Davis, Jr. during the late 1960s as an undergraduate student. It was there that I learned the federal government was confiscating more than 90 percent of his marginal income, which led me to ask, “Who the fuck are these guys who can get away with such an injustice?” That’s not what America is all about. Sammy was doing all the work and taking all the risks but the feds were reaping almost all of the benefits.

It was at about this same time that I was reading Karl Marx, who espoused the belief, “From each according to his ability, to each according to his needs.” I concluded that the U.S. tax system was right out of Karl Marx.

Am I a tax resister? Not really. I pay all the taxes that are legally owed but I try not to pay a penny more. I don’t pay because of any moral obligation. I pay because I don’t want to be hassled by the feds. I applaud anyone who resists the feds or any other level of government.

I am rather aggressive in filing my tax returns. I have been audited a number of times but usually no deficiency is found. I am a CPA and I have a law degree and a master’s in taxation, so I know something about minimizing taxes. One time an IRS goon said I owed $122. I filed a Tax Court petition to fight it. When I met with the IRS appellate division goon to resolve the issue he explained that his supervisor needed to see a tax deficiency. I knew I didn’t owe it and cited the relevant Internal Revenue Code provisions to prove it, but he wouldn’t budge because his supervisor told him to come up with a deficiency, so I paid the $122 to get them off my back. I should have castrated both of them on the spot.

The Picket Line: In many of your surveys, you’ve asked people to say to what extent they agree or disagree with the statement “Tax evasion would be ethical if I were a Jew living in Nazi Germany in 1935.” For tax resisters, this is something of an obvious truism, but the people who answer your surveys frequently disagree with tax evasion even in such an extreme case as this. How do you explain this?

Robert McGee: I deliberately included this statement in my surveys to test the limits. I thought that surely tax evasion would be ethically justified if I were a Jew living in Nazi Germany. My early surveys used 1935 as the relevant date but I received an e-mail from a Jew who suggested 1940 would be a better date, so I used 1940 in my later surveys. Isn’t that incredible? A Jew who is more concerned with the date I chose than with the statement itself?

I received a lot of criticism for using the Jewish item. Many people thought it was offensive. Some people insisted that I remove that statement from future surveys. I actually did remove it, along with two other statements dealing with human rights issues, from my China surveys because I did not want my Chinese co-authors to get in trouble with the Chinese government. Human rights is not something Chinese scholars can discuss. But I kept it in the other surveys and I intend to keep using it as a means of testing the limits.

Personally, I believe that anyone who thinks there is an ethical obligation for Jews to pay taxes to Hitler is nuts, but the surveys have found that the vast majority of respondents disagree with me on this point. There are several possible explanations for their response. Some respondents just put 7 in each slot, indicating the strongest possible disagreement with any reason for tax evasion. I wonder if they ever bothered to read the 18 statements.

Another possible explanation is that they worship the State and believe that there is always some obligation to pay. Although the Jewish item usually received lower scores than the other items, indicating some agreement with the statement, the Jewish item did not always receive the lowest score and the score it did receive was often in the 3 or 4 range, indicating that a strong degree of disagreement existed in the minds of the respondents.

Another explanation is that some religious nut cases believe God commands them to pay taxes. They follow the Bible blindly in the mistaken belief that God wrote that book. Actually, the Bible is unclear on the point. In some places it states that we must obey all laws but in other places it fudges a bit. Jesus weaseled out of the issue by stating that we should pay Cæsar the things that are Cæsar’s and pay God the things that are God’s, without indicating exactly what Cæsar is entitled to.

The Picket Line: Have you had an opportunity to engage directly with any of your survey respondents who stated they believed that German Jews had an obligation to pay taxes to the Nazi government, to ask in more detail why they felt this way? Do you find that if people are challenged to think through examples such as this that their opinions on conscientious tax resistance in general tend to become more accepting?

Robert McGee: I am now doing a study with a co-author who is a Hasidic rabbi. He distributed the survey to his orthodox Jewish students. Surprisingly, many of them put 6 or 7 in the slot for the Jewish statement, indicating a strong disagreement with the view that Jews are ethically justified in evading taxes in Nazi Germany. Females often had higher scores than males for this item, indicating that they were even more strongly opposed to evasion.

There are several possible explanations for the high scores even among Jews. There is the widespread belief within Judaism that God commands Jews to obey all laws, which includes tax laws. If one really believes that bullshit, it is easy to conclude that Jews have an ethical duty to pay taxes to Hitler.

There is another widespread belief within Judaism, which goes back hundreds if not thousands of years in the Jewish literature, that Jews must not do anything to discredit other Jews. Therefore, a Jew must not evade taxes, not because of any ethical duty to the State but because of a duty to other Jews.

Another reason cited in the Jewish literature is that Jews must not do anything that might cause them to go to jail, since they would not be able to practice their faith while in prison.

Ayn Rand would probably cite this belief that there is a duty for Jews to pay taxes to Hitler as an example of the sanction of the victim.

Does inclusion of this item in the surveys make people more likely to believe that tax resistance is sometimes justified? In some cases I think that it does. But the high scores for this statement indicate that inclusion of the Jewish example is not very persuasive. Although this example is often thought provoking, I do not think it convinces many people that tax evasion can be justified on moral grounds, although it does start them thinking about the issue. If they were convinced, they would have put 1 in the space provided, which was almost never the case.

From conversations I have had with respondents I have found that many of them have never before questioned the moral authority of government to extract whatever it likes from the citizenry. One explanation is the belief that any democratically elected government can do no wrong in this regard because the people have consented to be taxed. I have pointed out the flaws in this line of reasoning in my various books and articles, but very few people have read what I have had to say on this point, and some people who have read my stuff have sent me vitriolic e-mails disagreeing with the various positions I have taken on tax evasion.

The Picket Line: The IRS Oversight Board released its own survey on tax evasion this year, and although it used fairly loaded questions, it seemed to show a lot more sympathy for tax evasion than your surveys have. For instance, only 72% of Americans surveyed “completely agree” that “It is every American’s civic duty to pay their fair share of taxes.” Do you think that this indicates a stronger bias toward taxpaying amongst the business professionals, students and educators you survey than in the population in general, or is there some other explanation?

Robert McGee: The two surveys are not directly comparable, although it is interesting to compare the various views. My surveys were targeted at specific audiences, whereas the IRS surveys targeted a more general audience. Also, the IRS survey asked the views of Americans, whereas my surveys solicited the views of non-Americans, for the most part, although some surveys that have not yet been published solicited the views of various Americans, including members of the Florida Institute of Certified Public Accountants and various student groups.

I do not think you can say categorically that the results of the IRS survey are different from the results I obtained. The range of scores in my surveys was 1 to 7, so the argument could be made that anyone who answered 1, 2, 3, 4, 5, or 6 for at least one of the 18 statements believes that tax evasion is ethically justified in at least some cases. If one takes that position, then one can conclude that more than 90 percent of the survey participants believe that tax evasion is justified in some circumstances, since fewer than 10 percent of the respondents put a 7 in all 18 slots. But my surveys also indicate that the vast majority of respondents believe there is some ethical duty to pay taxes.

I’ve discussed McGee’s work on previous Picket Line entries, for instance: