No-one likes paying taxes, and according to the IRS the Federal tax gap was $496 billion (2014-2016). Tax loopholes are primarily to blame for this large disparity. Johns Hopkins Associate Professor Benjamin Van Durme and University of Maryland Law Professor Andrew Blair-Stanek are currently developing an AI program that aims to close tax loopholes. However, a common misconception is that tax loopholes are all illegal. This is not necessarily the case, Congress specifically includes some tax loopholes to incentivize certain activities such as investing. Such contemporaneous tax loopholes are not the target of this software. Rather, the software seeks tax loopholes fabricated by lawyers and accountants that provide overly generous tax breaks not originally intended. Furthermore, the goal is to have the AI software identify loopholes before lawyers and accountants can take advantage of them. The biggest question regarding this software is what are the implication for average tax payers? There will likely be no effect on everyday taxpayers, because individuals abusing these loopholes are at the upper level of the income distribution. Put simply, the majority of taxpayers will never know about these creative tax loopholes. While the software is intriguing, I personally believe it may not have as big of an impact as expected. There’s an underlying principal-agent problem that could hinder the effectiveness of this software. Specifically, the same individuals we elect to hold positions of power, are also the same individuals who benefit from these creative tax loopholes (irrespective of political party). Therefore, it will be interesting to see what impact this software has in the future.
Article: https://finance.yahoo.com/video/ai-almost-game-changing-potential-205004615.html
2 comments:
I agree that AI filling tax loopholes will not make a significant impact. A very small percentage of Americans understand that tax loopholes are accessible and take advantage of them. Even if AI does close the loopholes, it will not cause the ones who benefit from them to be harmed significantly from the closing of loopholes.
I didn't know that there are tax loopholes. This was a very interesting topic to read about. In the future it will be interesting to see how this impacts the economy whether that will be a good or bad impact.
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