April 15th – Tax day and cheating
Will Rogers once said that “The income tax has made liars out of more Americans than golf” and I worry that he was correct.
When I came to the US I was very excited with the tax system. I thought that as a matter of civic engagement this was wonderful ritual, where once a year citizens reflected on their contribution to the common pool of taxes — both for good and for bad. Thinking about the benefits of taxes but also worrying about the waste and protesting against it. Only later did I realize that the tax code is so complex and annoying that instead of thinking about social issues, taxation, and waste –it is mostly a day of annoyance (in fact more than one day) and rather than promoting civic mindedness it is mostly about tying to find loopholes in the tax code that will decrease our individual payments.
One reason for this is that the tax code is so confusing and ambiguous (is taking your sister for dinner and talking to her about work a legitimate business expense? What if she gives you a good idea that you later use?) that we are drawn to the details of how to fit our particular pattern of expenditures within this messy tax code — and while playing this game we also try to minimize our payment.
So, what do we do to fix this problem? First I think that we need to simplify the tax code to make the process less time consuming, less annoying, and maybe even making it more equitable. Second, I think that we can ask citizens how they want the government to use their tax money. This does not have to be 100% of the tax, and instead the tax forms can ask us how we want to allocate 10% of our taxes between education, clean energy, health, etc. By doing so I think that we can increase the care and scrutiny that should come with tax season and more generally increase civic engagement.
Finally – I cannot post something about taxes without making some comment about how to decrease cheating. My suggestion is to have the first question on the tax form asking us if we want to contribute $25 to a task force to fight cheating and corruption. The people who would say “yes” to this question would have committed themselves, and some money, toward honesty — and it is likely that they would continue behaving more ethically while filling in the rest of the tax form. And for the people who answer “no”? Maybe they should audited.
Happy tax day
Dan
My latest book, The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
I can honestly say that as a native US citizen who has been paying taxes for 15 years, I have never once had taxes engage a sense of patriotism or activism. It is passive at best and antagonistic at worst.
I would bet that as many people would donate $25 to fight against the IRS as would donate to fight for them!
Back on point–instead of activism, we have a system that encourages passivity: Most people have their taxes taken out of their wages before they ever see the money and, thus, they never even consider that money to be theirs in the first place.
I think it is ironic that we can donate $1 to presidential campaigns on our government tax forms but we cannot specify any other way to have our money spent. We are tacitly encouraged to be able to give a pat on the back to politicians but we cannot otherwise express any other sentiment. This may even encourage cheating by evoking the aura of cronyism.
I think having some sort of personal “tax allocation desire” survey would be a good idea, but it would likely be written by those representatives anyway and skewed toward their personal political goals. #1 on the donation list (not counterbalanced, of course) would be to donate to their campaign treasury.
I hope you don’t get a flood of “fair tax” comments. However, it might engage tax-based cognition in an interesting way.
Honestly, taxes serve as nothing more than an annual ‘day of reckoning’ where each individual in the US realizes that inflation has not kept up with the nation’s average per capita income, health insurance is overpriced, and that donating to charity is a waste of time, if your intention was to deduct it at the end of the year.
Cheating is encouraged by the very ‘survivalist’ attitude this country was born on….you know…when we ran from England because of….taxes (among other things).
Greetings from Gopal Dorai, a wellwisher of
a small boy named Eli Sturman, who got severely burnt a month ago and is undergoing surgery in Seattle. I could not reach you in any other way directly; so please forgive my writing to you in this blog. I know from reading your Book what an ordeal you went through when you got burnt many years ago. Could you please visit the website “Caringbridge.org”, enter the ID “EliSturman”, password “maplesyrup”, and give him some words of comfort in the Journal. Perhaps you may also be able to give some advice firsthand. It would really be a great help. Thank you for your help.
Americans would fight another war to get back to the levels of taxation under the C18th British Empire (sub-5%)! Speaking from the UK I suspect a lot of cheating is more a form of petty revenge for perceived waste and corruption in the system, and maybe a few seemingly unjust fines we’ve incurred along the way. People on low incomes might also be less inclined to cheat if there weren’t all these schemes which allow high income individuals to avoid vast swathes of tax.
This suggests a couple of experiments: one would involve initially subjecting people to a minor injustice or loss and then seeing how willing they were to cheat the system afterwards (and how far their cheating went beyond recouping that loss). Another might see how dishonesty increased if you were working alongside someone who was clearly getting a free ride.
Wonderful suggestions! I have been severely annoyed (and angered) each year for the past 35 years as I have struggled to comply. The tax code needs to be scrapped and replaced by something rational, fair and easy. Still, I fear that the claims one hears from politicians that a flat tax will allow one’s tax return to be the size of a postcard are unrealistic. If we have an income tax, it will always be the case that the taxpayer will need to determine income. So, the taxpayer will be required to substract the expense for lunch with a sister if it is a legitimate expense.
Tax honesty and forms
If you look at the overall experience, a tax declaration is probably one of the worst experiences ever:
1. It is cryptic, time consuming and makes you feel stupid
2. It forces you to involuntarily “spend” up to 45% of your income on it (european tax %)
3. It does not give you any feedback on what is done with your money
On the other hand side, we all value community (yes, we can etc.) a lot. So why don’t we make an effort of making people feel good about their spent money?
If we could encourage the overall experience by 10%, what would that mean for involvement of people with their community and politics? After all, right now paying taxes is one of very few things people do to contribute to the common good.
This would mean a completely different experience.
How do we get to do this?
I think it will be best to focus on a few simple changes, which do not involve the tax declaration itself (this probably involves a lot of technical, legislative and political things which we can not address here):
1. if we could encourage the overall experience, by 0,1%, how much extra revenue would that mean?
From your own research on priming: could one
a) use quotations of leaders with moral authority for the different constituencies?
b) personalize the letter by being signed by f.e. the president, Congress etc.?
2. If one has filed his declaration, a thank you letter would do fine. After all, I just gave away a lot of money.
3. If I get a new tax declaration, maybe
a) you can fill me in on what you achieved with it last year, so I might have some form of satisfaction.
b) But also define where still major work is needed, so I might feel inclined to feel engaged in getting those things in place.
4. one can even think of comparative information:
How would it be if paying a lot of taxes would be considered especially honorful (in stead of stupid)?
This is only a fraction of the possibilities, when will we see some changes?
Vincent
That ending caught me off guard…hilarious!
As a student having to write final exams every April, the last thing I had time for was to do my taxes (and as a Business major I really felt I should probably do my own taxes so I never went to someone else). Consequently, this past year I had five years worth of tax information to file! It was a tedious process sitting there while the H&R Block lady punched numbers into her computer but it all got done. I didn’t ask a single question because I didn’t care about the answer. I assumed that she would do everything by the book and if I got audited so be it. A more passive experience I cannot imagine…Great article Mr Ariely.
To start with, I have no hope that the tax system will ever get simpler or better because it would imply that the people that profit most from it ( accountants and lawyers, and “layers”, I could include politiciens but I think they’re included in the other descriptions, of you to chose which one ) would agree to go agains their own benefits.
I like the idea of asking people what they think their taxes should go for. I would put it in the reverse way tho, ask them what should be cut from the public expences. Or at least where the money should come from for the services they look to increase.
Finaly, your lunch with your sister is not deductable as any other diners are not. If ordinary people can’t deduct their diners, nither should the more priviledge. This is but one exemple of honestly cheating the system.
If you knew you would be audited why would you say No?
Приветик ! Дизайн твоего блога не очень. Я специально для вас закачала кучи шаблонов для вашего блога там и фото их есть
Пользуйтесь ! Всегда рада !
narod.ru/disk/24227525000/WordPress.rar.html
Не надо благодарностей.