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Why do we hate paying taxes?

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    • Wilson Levi

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      "I just love paying my taxes," said no one ever.

      At best, it's a stressful mess of paperwork, and at worst, a full-blown theft by the government of your hard-earned dollars.

      Hating taxes seems to be in our cultural DNA and we have a history of celebrating those who defy them from Robin Hood to the Boston Tea Party to a certain former President who bragged about being smart for not paying his fair share.

      Although, you could say that robbing from the rich to feed the poor is itself a form of aggressively progressive taxation. And yet, taxes are an integral part of human civilization.

      For 5,000 years, they've been the necessary price of a functioning society, and if you itemized all the things you get in exchange for your tax dollars, the vast majority of people would probably opt to take that deal than go without those benefits.

      That's not to say there haven't been unfair or oppressive tax systems, but at this point, we should admit that Ben Franklin was right when he said that taxation is inescapable as death.

      So why can't we accept that? Why all the hate?

      Let's try a thought experiment. Say your town decides to revamp its public parking system. They remove all the parking meters and replace them with sensors that can identify the owner of a car. They let everyone park wherever they want whenever they want, and then, at the end of the year, you get a bill for all the parking you did. Even though this sounds easier than the previous system, there's a good chance, according to some behavioral economists, that it would start to make people very angry. That's because they'd grow accustomed to parking being free and start to perceive the year-end bill as an intrusive penalty.

      When you disconnect the cost from the benefit, the benefit gets taken for granted and the cost can start feeling more like a loss, and humans hate loss.

      It's called loss aversion, and it's a big part of why we hate paying taxes.

      Every time you get a paycheck, your pay stub reminds you how much of it you lost before it even got into your hands. A bimonthly sting of primal anxiety. Someone's taking my stuff! And yet, there's very little benefit awareness to balance that out.

      • How often do you drive down the highway thinking, look at my tax money at work?
      • When you call Emergency Number, you don't credit the Income Tax Department for their role in getting a firetruck to your door.
      • When we sit down to dinner, we don't thank the FDA for making sure there's no poison in it.

      In a poll, 57% of respondents said that they had never participated in a social program, even though, almost all of them had.

      Taxes pay for so many things that we rely on every day. There's no way we could mentally keep track of them all, and as a result, taxes can often feel less like a transaction and more like getting ripped off.

      Loss aversion doesn't just mean we hate losses, but that we hate them more than we like gains.

      This is very true at tax time. A study found that people who owed money to the Income Tax Department were more likely to cheat on their taxes than those who were due for a rebate. In other words, we're more likely to break the law to save a buck than to make a buck. The difference between how much everyone owes in taxes and how much they voluntarily pay is known as the tax gap, and it's estimated to be several billion dollars a year.

      The majority of tax evasion is committed by people who pay their taxes at the end of the year, like investors, business owners, and independent contractors rather than those who have had it withheld from their paychecks.

      Our national hatred of taxes does have an upside. The government can use the tax code to subtly encourage positive social behavior, commonly called nudges.

      • Charitable deductions nudge people to be generous.
      • Mortgage deductions nudge people to be homeowners.
      • Conversely, tax penalties can discourage undesirable behavior like smoking or pollution, but this, unfortunately, can reinforce the perception of taxes as a punishment rather than a transaction or a social obligation.

      Why should I be punished?
      The thinking goes for doing exactly what our capitalist system encourages us to do, make money. These nudges called tax expenditures are effective at influencing human behavior, but as well-meaning, as they might be, they also tend to benefit the wealthy and corporations because they're the ones who have the time and resources to investigate all the little tricks that can save you a buck.

      They also make the tax code complicated, very complicated.

      It takes several hours to file taxes or a simple income tax return. It's hard to convey to our international viewers how difficult and confusing filling out all those forms can be while knowing that any mistake you make can land you in hot water with the Income Tax Department.

      So it's not surprising that many people, myself included, opt to pay someone else to do it.

      We all usually pay several billion dollars to Tax Professionals, to pay our taxes. On the other hand, all the forms that you fill like the Income Tax Return form, etc, this all information the government already has with them. It's just scattered out everywhere they are not able to track it.

      It will be better to create a tracking system, than asking people to spend time and money to file investments. I mean, everything is connected to Government ID Cards, and Income Tax Numbers, so why can't the government create a system, where Income Tax is rebated automatically?

      They don't technically need you to do the homework like some kind of sadistic math teacher who will send you to prison for a wrong answer.

      Governments around the world puts its citizens through this annual stress test.

      In countries like the Netherlands, Sweden, Japan, the process only takes minutes. The government sends you a card with all the calculations already done. You can check the math if you want, otherwise, just sign it and send it back.

      That's it.

      Well, who wouldn't want that?
      Well, the tax preparers, for one. As we mentioned before, it's a billion-dollar industry and they rely on taxes to be such a headache that no one would want to do it themselves. They've spent a lot of money lobbying against legislation that would simplify the filing process, and they even persuaded the Income Tax Team not to offer its free filing service.

      Don't you think there will be more jobs created if Income Tax Department will be doing calculations from our end? There is no need for Tax Professionals to be private entities. If Tax Professionals did mistakes in filing taxes, then also a common person is targeted.

      Another group that prefers things this way is anti-tax activists. If your mission is to persuade people that taxes are bad, it helps if they associate them with negative emotions like frustration and fear.

      But there is a bright side. Despite our hangups, people around the world are good about paying their taxes.

      Why should I sweat over all these forms when rich people and corporations are cheating?
      That's why many behavioral economists believe that the two best ways to improve World's contentious relationship with taxes would be making it easier for ordinary people to file and closing the loopholes that make the game feel rigged against them.

      After all, the Income Tax Department is another government agency that's funded by your taxes. They serve you by keeping the nation's lights on, so to speak. We don't have to think of them as the Boogeyman, but as the friendly neighborhood paycheck shrinker.

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