By Steve Kelman

Blog archive

Tax day: The price we pay for civilization

I was at my tax accountant's office the other night to finalize my tax return, and he informed me that I would be getting a big refund. My initial reaction was to be overjoyed, but then I thought about it for a moment: the reason for the refund is that my quarterly estimated tax payments during last year had been based on my 2008 income. I was due a refund because I had paid too much estimated tax, which in turn was because my recession-battered 2009 income was down substantially from 2008. I should have been depressed to learn about my impending refund, not happy.

My own story, though, illustrates a common American fixation with tax minimization that often includes large doses of irrationality. Some do stupid things just in order to get their tax bills down, such as making nonsensical investments because they offer a tax advantage. Others spend a lot of time scheming ways to increase their incomes by avoiding taxes rather than by being more productive.

On tax day, we should think about the dictum of the great jurist Oliver Wendell Holmes, who wrote that "taxes are the price I pay for civilization." At its basic core, what government does -- through laws, the justice system, and creation of a sense of common social identity and cohesion -- is to enable people to live together in relative harmony, rather than being at each other's throats. The British philosopher Thomas Hobbes wrote centuries ago that, absent government, life would "nasty, brutal, and short."

Needless to say, not many of us have these kinds of thoughts today. It is particularly weird -- sometimes I am bemused by this, sometimes annoyed -- to hear people who work for government contractors go into anti-tax overdrive mode. Without taxes, which are the ultimate source of their firms' revenues, they wouldn't be in business. Everybody wants to reduce government spending, but when you ask people what they want to reduce, they respond "foreign aid," which constitutes a minute fraction of the federal budget, but not cut back on entitlement programs that, along with defense, dominate the budget.

On tax day, knowing the popular (and populist) anger that is out there, I am reminded of the imperative for all of us in government to improve government management so that government can, in the words of the reinventing government movement, "work better and cost less." But I also am taking pains to remind myself of Holmes' words.

Posted by Steve Kelman on Apr 15, 2010 at 12:08 PM


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