I don’t know how much damage is done - that sounds a little far-fetched.
I always told my kids the truth. We never did the whole Santa routine, or the tooth fairy, or anything else. I just figured that I’d want them to be able to believe me, so I didn’t bother with such sillyness.
Sillyness is a good thing.
I find people aren’t silly enough these days. Everyone seems so serious and concerned and earnest, even to the smallest kids. Glee and foolishness while relating to little children, and even big ones, is right and proper.
Trust me on this, as the oldest of five kids, the father of two and the grandfather of 6. There are no deep seated, or shallow seated for that matter, feelings of being lied to resulting from dressing up as Sanat Claus and putting some gifts under the tree while the little ones look on in wonderment.