There may well be some good reasons to tell your kids that Santa Claus is real. However, today I'd like to talk about one common argument for Santa-ism that I find unconvincing: the idea that belief in Santa encourages imagination.
I think that telling kids the Santa story -- with all its strange and amazing trappings -- definitely encourages imagination. But (imagination-wise) I don't see any added benefit in telling them that it's real.
For full disclosure, I'll admit that I'm sort of half-heartedly playing along with the Santa charade for Léo this year, mostly because I've found that hinting that Mom and Dad bought the presents causes a huge tantrum to have the presents now. At the age of five, "You can't have your train set now because Santa's not bringing it until Christmas" is a lot easier to understand than "You can't have your train set now because opening all the presents on Christmas morning is a fun tradition that we love." (I think his seven-year-old brother Nico is wavering, though, and is leaning towards figuring out that it's all a game.)
In order to analyze this question, I've been noting down some of my kids' fantasy play lately. Here are some examples:
* As I mentioned here, Nico's study of the Solar System has inspired Léo to invent a new Solar System (called the "The Invented Solar System"), which includes multiple giant Earths and -- most importantly -- it's the home of the planet "where live the pitcher poo-poots" (Léo's planet). Pitcher poo-poots, by the way, are a carnivorous plant which (I think) Léo invented when Nico was studying carnivorous plants. You can hear him mention them from offstage during Nico's nature documentary. Another interesting fact he told me about the planet where live the pitcher poo-poots is that the numbers there are finite. Where live the pitcher poo-poots you count 1, 2, 3, 4, 5, 6, 7, 8, 9, "dek", "el", "doe", 100 -- then you're done. (Bonus points to anyone who can guess where "dek", "el", and "doe" come from!)
* During a recent snow storm, Nico became enamored with the idea that Snow Miser sent it, and he started drawing all sorts of diagrams of how Heat Miser and Snow Miser control the weather. I asked him "Now you know that Heat Miser and Snow Miser don't really exist, right?" (People get annoyed at me for pointing out that Santa and God aren't real, but I can't get in trouble for telling kids that Heat Miser and Snow Miser aren't real, can I?) Nico said that Of course he knows that, and explained that it's just pretend, and then went right back to his drawings of which one controls which region during which part of the year. Léo agreed, and went on to add a third Miser brother -- "Train Miser" -- who sends trains all over the world!
* Léo has invented an alternate Santa Claus, called "Pirate Santa Claus." Pirate Santa Claus is different from regular Santa Claus in that he has two bags of toys, but all the toys are scary toys (as in The Nightmare before Christmas). Pirate Santa Claus also has a sister who has a long white beard. However, Pirate Santa Clause does not have an eye patch. (I learned these facts when I was helping Léo draw Pirate Santa Claus.)
You can take this evidence both ways. After all, Léo is the more fervent Santa-ist, and he's the one who came up with all the off-the-wall fantasy stories on this list, starting largely from real-life facts he learned from his science-minded older brother Nico. Nico joins in on playing in Léo's imaginary universe, but (left to his own devices) he's more inclined to draw things that are real. On the other hand, in Léo's imaginary world, it doesn't seem to matter much whether the initial stories he uses as raw material are true or not.
Also note that believing a story is true can potentially constrain creativity. I recall that my own (devoutly religious) mom didn't care for Nestor the Donkey or "The Little Drummer Boy" simply because if the birth of Jesus story is true, then you can't just embellish it with lots of made-up characters and episodes as though it were a legend. Yet I remember (as a child) doing elaborate drawings of Santa's workshop -- knowing full well that it wasn't real -- with Mom's approval. That was the beauty of it: if you know it's a legend, you're at liberty to embellish it however you like.
So I'm still not entirely convinced that saying I believe in Santa Claus -- and meaning it -- is more magical than allowing Santa to live in a world of pure imagination. :D