Tax Analysts Blog

Hate Filing Your Tax Return? Good.

Posted on Apr 3, 2013

Is there anything good about filing a tax return? For most of us, of course, it's a necessary ritual if we hope to stay on the right side of the law. And it certainly keeps the wheels turning for the federal government.

But is there another, more high-minded value to this annual April unpleasantness? Larry Zelenak, a law professor at Duke and the author of new book on income taxation, thinks the answer is yes.

“If, as Oliver Wendell Holmes Jr. said, ‘taxes are what we pay for civilized society,’ the filing of Form 1040 draws our attention to our duties as citizens in a way that no other levy, including a national sales tax, could,” Zelenak wrote Monday in a New York Times op-ed.

In his book, Learning to Love Form 1040: Two Cheers for the Return-Based Mass Income Tax, Zelenak makes this point even more explicit. Returns force us to confront how much we are actually paying to the federal government every year.

    Prompted by that information, taxpayers may reflect—as they should—on whether they are receiving good value from the federal government for their income tax dollars.

Return-free systems – including a VAT or a national sales tax – would not promote this sort of civic reflection. With another nod to Holmes, Zelenak concludes that “the filing of a tax return, with its high visibility and ceremonial aspect, calls the taxpayer’s attention to his status as a taxpayer and a purchaser of civilization in a way that would be impossible under a return free tax system.”

Zelenak is on to something. Filing a return is valuable, even if it’s painful. In fact, it’s valuable precisely because it’s painful. As I argued some years ago in my own op-ed, filing is probably too easy, not too hard.

    With paid preparers and sophisticated software, most Americans are protected from grappling with the worst features of the modern tax system. This may seem like a good thing, but it comes at a steep price.

Specifically, our filing aids make it easier to tolerate a bad tax system. “When it comes to taxes,” I wrote, “pain can be a good thing. It keeps people vigilant, encouraging them to keep a wary eye on government. That, in turn, exposes problems and encourages reform.”

In the years since I wrote those words, I’ve had occasion to file seven more tax returns. And I have to say, all the pain is starting to get to me. Zelenak, for his part, wants to make that pain a little less severe, and he endorses a variety of ideas that would simplify and streamline our April ritual.

But he wants very much to retain the essential nature of that ritual, and even to restore its former status as a badge of civic virtue.

I wish him luck. But the more I study tax history, the more I’m impressed with the centrality of tax collection in the evolution of U.S. tax policy. America, we often hear, is a nation of tax haters. Which is true, as far as it goes.

But people everywhere hate taxes. What makes the United States distinctive, I think, is our insistence on collecting so much of our tax revenue in a distinctly unpleasant way. No stealthy value-added taxes for us! We’re going to do it the hard way.

Which goes a long way toward explaining why we’re a low-tax country.

Read Comments (5)

Christopher BerginApr 3, 2013

Joe, great post. But I fear our distinction in collecting income taxes is
fading. And I fear that will change us as a nation. Being a nation of tax
haters is one thing. But the decades-old campaign conducted by some of our
politicians to turn "tax" into a four-letter word has, I believe, done the
nation a great disservice. It could be argued that mass rituals are better than
class rituals.

vivian darkbloomApr 4, 2013

I'm trying to reconcile the logic behind the following seemingly conflicting
notions:

1) "taxes are what we pay for a civilized society" and making tax filing
painful and the payment of taxes more visible focuses the attention of our
citizenry on how our tax dollars are spent (as seemingly argued by Zelenak and
Thorndike);

with

2) The fact that about 46.4 percent of American households pay no federal
income tax whatsoever and, as apparently argued by Mr. Bergin and Prof Graetz,
we should exempt at least 100 million from even filing federal income tax
returns:

www.taxanalysts.com/taxcom/taxblog.nsf/Permalink/UBEN-95YUP7?OpenDocument

vivian darkbloomApr 4, 2013

Chris,

You may feel free to call me Vivian or Viv, or use the famiilar du or tu, or
whatever. Vivian vividly remembers about thirty-five years ago being somewhat
surprised that someone I'd never met started addressing me by my first name.
Those were, of course, somewhat different times (it was also a different place)
but the person happened to be an insurance salesman. I trust you are not
selling insurance.

Anyway, I suspect we might be able to compromise on the following:

The incidence of the federal income tax should be broad-based and should be as
transparent as possible. To use the cliché, I do think it's helpful if people
not only have "skin in the game", but that they also know it, no matter how
thin that epidermis might be. As it now stands, everyone pays, directly or
indirectly, for our fiscal imprudence; but, I think it is the indirect ways
that distort decision making. I'm all for simplifying the system to make how
much one pays more evident. Eliminate almost all "tax expenditures" and
conduct most spending through direct programs. If you and Professor Graetz can
come up with a system under which most people don't need to file income tax
returns (I take it that this means much of the payments are withheld at source)
and simplify returns for those who do file, I'm on board, too. I would,
however, make one minor adjustment to that program: Each citizen should get an
annual scorecard from the government that indicates exactly how much payroll
and income tax they contributed over the year, as well as their pro rata share
of the federal debt and deficit.

Joseph J. ThorndikeApr 4, 2013

I think the "47 percent" issue is real, though not in the way that Mitt Romney
did. I don't believe in the whole "nation of takers" vs. "nation of makers"
dichotomy. The 47 percent pay plenty of taxes, and they do plenty of making as
they go about their lives.

But they don't pay income taxes, and I think that's a problem. The income tax
is more than just a revenue tool. It's also a symbol of shared responsibility,
an element of fiscal citizenship. Once a year, we should all engage in
something a little bit unpleasant that reminds us we're all in this together.

And as we confront a serious long term fiscal gap -- one that will inevitably
require sacrifice from everyone, on both the tax and spending sides of the
equation -- I don't think we can afford to leave half the country outside the
income tax.

I don't think the 47 percent need a big tax hike. But I do think it's unhealthy
for the tax system -- and the country -- to have them paying nothing.

Nonpayers are a problem chiefly because they shake the faith of payers. The 53
percent need to know that they are not in this alone. Even small payments from
the 47 percent would serve as useful reminder to everyone that taxpaying is a
shared responsibility.

Christopher BerginApr 4, 2013

Vivian (if you will, I feel we are now on a first-name basis), I think I can
help you out here. I agree with Joe regarding 1). Regarding 2), I think Michael
Graetz is one of the best tax policy thinkers of our time, but my growing (and
I'm not fully there yet) attraction to his plan has more to do with surrender
than anything else. Hence the point of my first comment to Joe's post here.

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