Erin Scharff (Arizona State) presents Fake News and the Tax Law at Toronto today as part of its James Hausman Tax Law and Policy Workshop: 

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 income tax system. 

Unfortunately, a significant body of research suggests these misconceptions shape voter preferences about tax policy which, in turn, impact the policies themselves.  That people are easily confused by false tax information 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. 

This Article builds on this literature by discussing its application to the specific challenges of accurately covering tax policy in the news.  In Part I, we discuss what is already known about the public’s misperceptions of the tax law.  In Part II, we discuss the rise in “fake news” more generally and what makes social media a particularly effective way of spreading false information.   In Part III, 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 the ways tax laws’ complexity—along with legitimate disagreement about tax policy—make it difficult for fact-checking journalists to flag tax “facts” as false or inaccurate.  In the final section of the Article, we offer recommendations for how tax administrators and policymakers can combat these misinformation efforts.