Final answer:
A taxpayer can report revenue from a hobby without any tax benefit from the expenses due to tax laws that require income reporting but do not allow hobby expense deductions under the Tax Cuts and Jobs Act of 2017.
Step-by-step explanation:
It is possible for a taxpayer to report revenue from a hobby without receiving any tax benefit from the expenses incurred in the hobby because of the way tax laws are structured. Under the U.S. tax code, individuals are required to report all forms of income, including money earned from hobbies. However, under the Tax Cuts and Jobs Act of 2017, taxpayers cannot claim deductions for hobby expenses as they could in the past. This means that while the income generated from a hobby must be reported and is subject to tax, the expenses cannot be deducted from this revenue. This could result in a situation where hobby expenses are out of pocket, with no tax benefits to offset them.
Any tax that the government imposes must ultimately lead to revenue generation; otherwise, it could negatively affect the taxed entity. High taxes could potentially decrease the occurrence of the taxed behavior, as citizens might be discouraged from engaging in it, which may affect overall economic growth. Consequently, if hobby expenses were still deductible, it may encourage more spending on hobbies, but without the ability to offset these costs against tax, there is less of an incentive to engage in such expenditure.