Tax Day!

April 15th, 2013 at 9:10 am

And thus an opportune time for a moment of reflection on the spectrum of emotions this day, and this topic, evokes.

First though, everyone should do what’s required on them on April 15th.   No, I’m not talking solely about getting the check in the mail.  I’m talking about the traditional OTE tax day visit to the wonderful website “I Heart Taxes” a website dedicated to the terribly under-promoted idea that taxes are not just costs, not just a “burden” from which we need “relief” (note that every tax cut bill now has the word “relief” in it).  They have benefits that we all tap every day.

Go there to play Tax Evaders! where for every tax evading corporation you take out, some portion of your town’s services come back on (I found that even a single hit turned the lights in my school back on!).  And remember, all proceeds from purchases on the site are remitted to the Treasury.  It’s a great site that should be much better known.

These kinds of thoughts were nicely amplified in this NYT piece about taxes and happiness.  The figure below is supposed to show some positive correlation between more progressive taxation and happiness, though I don’t see it.  I suspect, as the article suggests, that there’s a pretty hefty cultural dimension to this dynamic, and in this country, which began with a noted tax revolt—the Boston Tea Party (not those eponymous pretenders today, who actually both use and like more government services than their reputation suggests)—the culture tilts solidly against those of us who often argue for more revenues.

For that reason, fact-based arguments, like here (we are undertaxed in historical terms) and here (…and in international terms) don’t resonate as much as they should—there’s little positive context within which to place that information.  The question, of course, is how does that change?

As I’ve often noted, the anti-tax crusaders have two huge legs up here, the latter of which is too rarely discussed (it’s missing from the NYT piece, e.g.).

Their first advantage is government dysfunction.  Not only can they run for office on this platform: government is the problem, it’s broken, let’s cut your taxes and shrink it.  Then if they win, they can ensure that their prophecy that gov’t is broken is fulfilled.  Fomenting dysfunction is a highly effective strategy of those who want to cut taxes and shrink government.  If the public sector worked better, it would have more fans and that’s the last thing they want.

The second advantage anti-tax crusaders have is the long-term stagnation in pretax income.  I myself have often said something to the effect of “given the stagnation in their pretax income over the last decade and a half, we can’t reasonably raise taxes on middle-class households at this point.”  President Obama has long painted himself into this corner, pledging not to raise taxes on households below $250,000, meaning the bottom 98% is off limits!

His thinking is based on the correct assessment that since growth has largely bypassed middle and low-income families on its way to the top of the income scale, the middle class has to be protected from tax increases while those who’ve received the lion’s share of the growth have to pay more of their “fair share.”  I suspect this mindset also contributed to making 82% of the Bush tax cuts permanent in the fiscal cliff deal, a move that will make it much harder to raise the resources we need in coming years.

At this point, pro-tax arguments are almost exclusively based on this fairness theme, and again, I myself am a purveyor of such arguments, with lots of outrageous distributional graphics to make the case.

But this approach is way too limited.  In fact, it skips a fundamental step.  People have to believe, as is more often the case in other advanced democracies, that their money will be efficiently spent on services they want and need, and that the private sector either won’t provide (public goods, infrastructure, pollution abatement, innovative investments) or will do so less efficiently and affordably (retirement security, public education).  And for people to effectively and lastingly believe it, it has to be true.

Thus the importance of elected officials who share that value.  I remember– vividly and sadly–Bill   Clinton saying “the era of big government is over!”  Don’t get me wrong; I desire neither “big” nor “small” government.  But that frame just blows a dog whistle heard by supply siders, Norquistian pledge signers, and their massive lobbies of anti-tax advocates.

President Obama’s been better—in his presentation, a lot better—but he’s got a weird angle to this tax point.  He articulates, better than almost anyone in high office in recent years, the “we’re-in-this-together” theme, along with quite deep and resonant analyses of how and why we need an amply funded, efficient government sector.  His health care plan alone is evidence that he gets this, as are his words and many of his actions regarding investing in clean energy, infrastructure, safety-nets, productivity-enhancing innovations, and education.

But his tax policy falls far short of his agenda.  Simply put, that agenda cannot be capitalized solely by households above $400,000 (about the top 1.5%) and the permanence of the Bush tax cuts noted above.

So, we’ve got a lot of work to do here.  I also quite liked the idea in the Times piece that would allow taxpayers to designate what some portion of their tax bill pays for:

New research points to the power of letting citizens decide for themselves where some of their taxes should be spent. Let’s say you love discovering up-and-coming writers — you might direct some of your tax dollars to the National Endowment for the Arts. Have strong feelings about the military? Put your money in defense spending. Of course, allowing Americans to allocate all of their dollars as they pleased might create problems. (Imagine a world where no one contributed to sewer repair.)

But research shows that giving people even a little say in where their taxes go can significantly change their attitudes. In an experiment recently conducted at the University of Pittsburgh, more than 400 Americans were asked to choose where, among the major categories of the federal budget, from military spending to anti-poverty programs, they would allocate 10 percent of their tax bill if it were up to them. This simple request not only bolstered people’s belief that their tax dollars were providing important services, but also increased their satisfaction with paying taxes.

That’s a fun, creative idea.  Along with better politicians, ones for whom dysfunction isn’t a strategy, and government reform—just because I talk a lot about market failure doesn’t mean I don’t know about government failure—perhaps we can begin to change the anti-tax culture that is so damagingly pervasive.

In the meanwhile, go ahead and whack some Tax Evaders, revive the tax base in your virtual community, and enjoy the reintroduction of all the virtual goods and services you’ve been virtually missing.  And work towards the day when we can make it real.


Source: NYT, link above.

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7 comments in reply to "Tax Day!"

  1. Perplexed says:

    Interesting post indeed! But we can also look at these same events and tendencies from a somewhat different perspective as well. Some time ago, I posted a comment to this site that included the following sentence: “Its a bitter irony that the over-represented Tea Party has cloaked itself in the name of those who took tremendous risks because they had no representation in government at all. What are those who have been disenfranchised by what we’ve allowed to happen to do now?”

    If you’ll recall, the slogan of the REAL TEA PARTY was “No taxation without representation!” While its difficult to get people to “like” taxes as you so well point out, what the true Tea Partiers were protesting was their complete lack of any say in the process; “without representation” was not an afterthought. It was not just a key part of their objection, it was their entire justification for “breaking the law.” Now we have the Koch fueled, over-represented (by the undue and unprecedented influence of wealthy plutocrats on a supposedly one-person – one-vote democracy) impostors, cloaking themselves in the garb of those that battled and risked everything for REPRESENTATION, making the claim that the battle was all about taxes; and almost everyone goes along with the ruse. I never saw anyone in the media connect the dots; I guess none of them know any historians they could ask about it.

    And now, instead of addressing the representation problem head-on like the true Tea Partiers, we look to develop ways to “work around” our plutocrats (who now hold the actual power), so “we the people” can have a say in where a little of the money goes. This contrasts pretty sharply with the ideal that, if our representatives were beholden only to their voters (and they were being prevented by law from any form of bribery or coercion), “we the people” would be deciding where ALL of the money goes, whether or not a tiny, extremely wealthy plutocracy is in agreement with what “we the people” choose. The importance of this “representation” aspect of a democracy is so critical to its ability to function as designed that our failure to protect the integrity of this relationship between the voters and their “representatives” has thoroughly compromised the ability of our Democracy to function as intended. What the original Tea Partiers fought so hard and risked their lives to achieve, (and then bequeathed to us), has been given up without even a shouting match or any compensation, or for any rational reason other than we forgot how important it was to protect it. Did we really think we were getting a “free lunch” by having wealthy people fund our political campaigns? How incredibly naive; especially “when we the people” have the option of taxing the wealthy (if we really think that’s a fair way to handle it), and we don’t have to actually sell them any influence for their “contributions.” The reality is that, if we want our Democracy to function like one, the voters have to control where the campaign finance money goes; the two are inseparably linked. “We the people” need to extract the harpoons that have been dug into our “representatives” and free them to act solely in our interest or find alternative employment (or a nice prison bunk if they can’t follow the rules).

    And while we’re reflecting “on the spectrum of emotions this day,” maybe we should also take some time out to think about how monopolies (either government granted or achieved through government acquiescence), are little more than hidden taxes that the rest of us pay to rentiers, that generate little if any public benefit in most circumstances. If our “representatives were actually representing us, they likely wouldn’t exist at all. If these “hidden taxes” were paid instead to the government, maybe we could find some useful purpose to put them to.

    • Jared Bernstein says:

      Great points. Led me to reflect on the huge gap between where “the people” are on say, background checks on gun purchases, and where the politicians are.

      • Perplexed says:

        Not to mention gay marriage, vaginal ultrasounds, abortion, voting rights, single payer options, and taxing the wealthy at higher rates among others. Only when people begin to understand that the money the wealthy “invest” in campaign contributions is provided to them by everyone through “monopoly taxes,” and then used to support the political objectives of the plutocrats at the expense of everyone else will they understand the importance of severing these links. 100% public financing of campaigns would cost the public no more than what they’re paying now; the only difference would be that the voters would retain the power they now “voluntarily” give up without a battle. Were freely giving the plutocrats veto power over who can realistically run for public office so they win regardless of which candidate gets chosen. Then we blame government for being the problem? Neil Postman’s book “Amusing Ourselves to Death” was pretty scary when I first read it; but that was nothing compared to watching it unfold for real!

  2. Michael C says:

    How do you fundamentally miss the intellectual gap you create in your column:

    “But this approach is way too limited…People have to believe, as is more often the case in other advanced democracies, that their money will be efficiently spent on services they want and need, and that the private sector either won’t provide (public goods, infrastructure, pollution abatement, innovative investments) or will do so less efficiently and affordably (retirement security, public education). And for people to effectively and lastingly believe it, it has to be true.”

    You say people have to believe in something, but then you say in order for that belief to be valid, it needs to be true. Those are two entirely opposing forces. The belief that government is efficient and the belief that government is inefficient are both beliefs. The truth has absolutely no effect on belief because it doesn’t require fact for someone to subscribe to it. Hence, why it is called belief. Where Democrats lose their footing in competing with Republicans is the same thing some Economists do when debating other ‘economists.’ By subscribing to the idea that belief is first required in order to find fact is what gives people the license to believe in things that are never true. It’s like Paul Krugman calling Paul Ryan an economist. Only a select group of people are going to go “But those are two different kinds of economists.” The vast majority are going to go “Well, if two economists are fighting, both of them have valid points to make.” By giving the wrong side false equivalency, you contribute to the problem to which you are trying to address.

    You can’t compete on a values platform with facts. Once you step into the murky “its all about what you value” water, you can do anything and say its based on some value you have. Cut taxes: making America Stronger. That’s a value, that’s a belief, and once you tell people that values and beliefs can lead you to facts, you give their false values and beliefs all the amunition it needs. Facts lead you to facts, beliefs lead you everywhere, including away from facts.

    • Michael C says:

      I mistakenly said that you can’t compete on a values platform with facts. What I meant to say was that you can’t compete on a values/ideological platform by first validating the idea of values and then switch to a fact-based argument.

    • Pinkybum says:

      I think you are getting yourself wrapped up in an epistemological fallacy. Essentially belief is belief every human constructs these beliefs they are the way humans can operate in an extremely complex world without going insane. I think you are getting confused between faith (a belief held without reference to fact) and knowledge. Knowledge being a set of beliefs that have been constructed based on experiential interaction with the world including those things we call facts. The phrase “We believe these truths to be self-evident” is not an appeal to blind faith.

  3. Tom Cantlon says:

    I know the NYT chart is not your chart but they’re an important info source and somehow they show MANY countries with much more progressive tax systems than we have whereas I’ve read repeatedly and in detail how we have one of the most progressive systems, largely because the VAT in so many countries is regressive. If the Times is wrong they should know it and not keep using it.