When Did Tax Avoidance Become Respectable?

71 Pages Posted: 8 Aug 2017 Last revised: 31 May 2018

See all articles by Steven A. Bank

Steven A. Bank

University of California, Los Angeles (UCLA) - School of Law

Date Written: August 7, 2017


No matter how many tax scandals are revealed in the media – and there have been many in the past year, involving a diverse set of taxpayers ranging from Donald Trump to Apple – what is most remarkable is that, by and large, the public has considered them relatively non-scandalous. This was not always the case. During the 1930s, even the most innocuous tax avoidance maneuvers, such as buying tax-exempt bonds, were attacked as morally suspect. When did that change and why? This Article offers a novel attempt to gauge the respectability of tax avoidance – using a unique, hand-collected dataset of newspaper advertisements for tax planning services in prominent national papers between 1930 and 1970 – and concludes that a shift occurred after World War II. The Article then explains the reason for this shift, suggesting that a combination of extremely high rates, a broadened base of taxpayers subject to that rate, and a deterioration of the wartime consensus for the rate structure laid the foundation for the respectability of tax avoidance in the 1950s and 1960s. In effect, just as the high wartime rates for the wealthy had been justified as a means of compensating for the sacrifice of the poor during the war, the pursuit, and tacit approval, of tax avoidance after the war was a means of compensating for the high rates at a time when the sacrifice rationale for them had ceased to be compelling. This history parallels the modern experience with corporate tax shelters and has lessons for those seeking to reform the current tax system.

Keywords: Tax Avoidance, Tax Evasion, Tax Loopholes, Tax History, Tax Reform

Suggested Citation

Bank, Steven A., When Did Tax Avoidance Become Respectable? (August 7, 2017). 71 Tax Law Review 123-177 (2017), UCLA School of Law, Law-Econ Research Paper No. 17-15, Available at SSRN: https://ssrn.com/abstract=3014985

Steven A. Bank (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

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