Question

a self-employed commercial artist reports taxable income of $7,000. Actually her income is considerably higher but much of it takes the form of cash for small projects and thus is easy to conceal. She considers herself part of the "underground economy" and defends her behavior as a tactic that allows her small business to survive. She argues if the business were to fail, the government would receive even less tax revenue.

Is the need to survive a reasonable defense for the practice described above?

Answer 1

It is not a reasonable defense as mentioned, because tax is only applied upon the profits earned by the freelance person or professional or small businesses. Besides, government gives many deductions and benefits to these entities so that they face the payment of lower tax amount upon the given level of profit. Hence, concealing the  cash income and not paying the tax upon it, should not be considered as a reasonable idea for the survival of the business, because a business pays the tax if and only if, it earns profit.

Further, tax collected from these entities are spent for the welfare of the poor and elderly people, ensuring social security for people and other development programs that create demand for the services offered by people like and artists and others. Hence, paying tax in right ways, comes back to favor them in terms of bigger market where they can sell their products and services and earn higher revenues.