Debunking the Basis Myth Under the Income Tax
75 Pages Posted: 8 Mar 2005
Date Written: March 2005
Tax basis is one of the most important, yet least studied, aspects of the income tax. This analysis calls attention to its importance and argues that taxpayers have the motivation, opportunity, and means to inflate the tax basis they have in their assets. We discuss the likely effect of basis overstatements in terms of revenue loss and suggest potential reforms. The institution of these reforms, if adopted, bodes well for rejuvenating the overall health of the income tax system.
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