DAN ARIELY

Updates

Celebrating April 15th (17th)

April 17, 2012 BY danariely

When I first moved to the U.S. for graduate school (which was a long time ago), I was very intrigued by and excited about the tax system and tax day. I envisioned it as a matter of civic engagement, a yearly ritual where citizens reflected on their contribution to the common pool of resources—for better and for worse. I imagined that people would consider the benefits of taxes—being able to fund schools, build roads and bridges, care for the poorest members of the community, and fund the defense of the U.S.—while at the same time watching for wastefulness and protesting against it.  And indeed this is how I looked at tax day for my first few years here.

Fast forward to when I finished graduate school and started making a real income, then I began to see April 15th the way most other people do. I realized that the tax code is so complex and aggravating that instead of making people consider values and social issues, their contribution to society, and government waste, it is mostly a season of shared grumbling and annoyance trying to get all your records together in time. With all of this complexity and ambiguity (is taking your sister for dinner while she’s in town and discussing work projects a legitimate business expense?  What if she gives you a good idea that you later use?), the only bonding we have on tax day is over the tedium of figuring out how much we owe and over the continual worry of whether we have done things correctly or not. So instead of promoting civic mindedness, the way the U.S. tax system is structured now highlights the small details of filing taxes. As a result, all of our attention is directed toward ending the irritating procedure, and in the process trying to find as many loopholes in the tax code as possible in order to minimize how much we pay.

So how can we fix this problem?  The first step is to simplify and clarify the tax code to make the process less confusing. The process of figuring and filling out tax forms is so exasperating it’s hard not to direct that feeling toward someone or something—and generally speaking, that something is the agency that seems responsible for your suffering, which in this case is the IRS. After all, it’s difficult to maintain a cheerfully civic-minded outlook, or even an even-keeled neutral outlook, in the face of such frustration.

Now imagine the simplest, least irritating approach to taxation. The least bothersome way of paying taxes is to have it done for you; for instance, in Israel, the government takes taxes out of people’s income before they even receive their salary. This means that in Israel, no one really knows their gross pay, but they do know their net pay, which makes them much more realistic about what they make. Generally speaking, the opposite is true in the U.S., where people know their gross but not net pay.

This is one idea, and it certainly would simplify things, but it would also nullify the idea of tax day as a day of citizenship and a time of reflection. So while we want to minimize the procedural pain of tax day, we don’t necessarily want to eliminate the possibility of thoughtful and critical participation in government that it provides. To make it a more beneficial experience, I think citizens should be asked how they want the government to spend their tax money. I don’t mean in the larger sense of voting for a political candidate and his or her economic ideology, nor do I mean the total amount that an individual pays in taxes; rather, I think there should be a section on tax forms that prompts the taxpayer to decide how to allocate 10% of his or her taxes. The choices could be among education, clean energy, health care, defense, roads and infrastructure, and so on. Not only would this give taxpayers a more apparent role in deciding where their money goes, it would avoid the problem of missing the forest for the trees.

With a less frustrating and more participatory tax system, it’s possible we could remake tax day into a more constructive and less arduous occasion. And maybe (maybe) we could get the government to be more responsible.


For now though, we should all look around at what our taxes pay for—the roads, the streetlamps, the police and fire stations—and remember that paying taxes is just part of life.

Happy tax day!