Fake News and the Tax Law

90 Pages Posted: 30 Sep 2022 Last revised: 24 May 2023

See all articles by Kathleen DeLaney Thomas

Kathleen DeLaney Thomas

University of North Carolina School of Law

Erin Adele Scharff

Arizona State University (ASU) - Sandra Day O'Connor College of Law

Date Written: September 19, 2022

Abstract

The public misunderstands many aspects of the tax system. For example, people frequently misunderstand how marginal tax rates work, misperceive their own average tax rates, and believe they benefit from tax deductions for which they are ineligible. Such confusion is understandable given the complexity of our tax laws. Unfortunately, research suggests these misconceptions shape voter preferences about tax policy which, in turn, impact the policies themselves.

That people are easily confused by taxes is nothing new. However, with the rise of social media platforms, the speed at which misinformation campaigns can move to shape public opinion is far faster now. The past five years have seen a dramatic shift in the landscape of false information, and scholars in a variety of disciplines, from law to psychology to journalism, have explored the increasing influence of fake news.

Building on this burgeoning literature, this Article is the first to examine the incidence and impact of fake news on the tax law. We analyze a unique dataset of tax stories flagged as “false” or “untrue” by reputable, third-party news sources. We use this dataset to explore common themes in fake tax news, as well as the ways tax laws’ complexity contributes to spreading false information. We then offer recommendations for how tax administrators and policymakers can combat these misinformation efforts. Specifically, we argue that insights from the literature on fake news can and should inform how administrators disseminate true tax information to the public. Further, understanding what types of tax laws are easily misunderstood or subject to manipulation should inform substantive tax policy design.

Keywords: tax, tax policy, taxation, wealth tax, tax reform, fake news

JEL Classification: E62, H20, H21,H22, H24, H25, H26, H29, H30, K34, A12, K42, K34, O33, O35, O38, J38, J30

Suggested Citation

Thomas, Kathleen DeLaney and Scharff, Erin Adele, Fake News and the Tax Law (September 19, 2022). 80 Washington and Lee Law Review 803 (2023), UNC Legal Studies Research Paper No. 4228063, Available at SSRN: https://ssrn.com/abstract=4228063 or http://dx.doi.org/10.2139/ssrn.4228063

Kathleen DeLaney Thomas (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-843-7630 (Phone)

Erin Adele Scharff

Arizona State University (ASU) - Sandra Day O'Connor College of Law ( email )

P.O. Box 877906
Tempe, AZ 85287-7906
United States

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