Just like Christmas, tax day comes but once a year. Unlike Christmas, however, tax day moves around a bit. This year, it falls on April 18, thanks to the celebration of Emancipation Day in the District of Columbia. The same will be true next year.
Still, April 15 gets all the attention. Every year, the Ides of April prompts an outpouring of news coverage about taxpaying. Much of it is practical — “Don’t forget those last-minute IRA contributions!” But some is more contemplative, taking stock of our national taxpaying ritual.
This is a communal moment, a moment of shared misery — much less fun than the Super Bowl, for sure, but one that comes with the consolation of a refund, at least for many people.
The think pieces on tax day were easier to write when people were still rushing to the post office on April 15, trying to beat a midnight deadline for mailing their returns. In big cities, brass bands used to play, and local TV news crews would chronicle the mad rush under blinding klieg lights.
Those were the days to be a tax geek.
Alas, electronic filing has put an end to that pageant. So, too, has the continuing popularity of paid preparers. Delivering a box of receipts to your accountant doesn’t involve quite the same drama as that scene at the post office. (Unless you’re late, in which case an overworked preparer can sometimes gin up a fair amount of dramatic irritation.)
Still, tax day remains a touchstone of American political culture, its vitality all but guaranteed by its temporality. There is nothing like a deadline to focus the mind.
Fiscal Mindfulness
Whenever an action is linked to a discrete moment in time, that moment invites reflection. And in the case of taxpaying, we might think of that reflection as a form of fiscal mindfulness.
Now to be clear, fiscal mindfulness is a term with some modest currency in management circles. Typically, it’s used as a synonym for cost control. A few years ago, for instance, the state of Alaska published a job opening for an office assistant: “Orders supplies, maintains inventory, coordinates surplus arrangements, and exercises fiscal mindfulness.”
My notion of fiscal mindfulness is somewhat more capacious. It draws (very) loosely on the mindfulness movement of recent decades, especially as popularized by writers like Jon Kabat-Zinn. “Simply put, mindfulness is moment-to-moment non-judgmental awareness,” Kabat-Zinn wrote in his landmark book, Full Catastrophe Living. “It is cultivated by purposefully paying attention to things we ordinarily never give a moment’s thought to.”
Having given credit where credit is due, let me now cheapen and misappropriate the concept of mindfulness. Several elements of Kabat-Zinn’s definition seem relevant to the sort of fiscal reckoning I have in mind.
We would all benefit from pausing, if only for a moment, to contemplate the tax system. We should stop to examine the system as it exists and operates today. This contemplation, moreover, would be enhanced by that nonjudgmental stance described above, at least initially.
Our national discourse over taxes typically generates more heat than light; people arrive on the scene with a collection of unexamined prior notions and proceed to ignore all inconvenient facts to the contrary. Tax experts often do better, thinking freely and creatively about policy reform. But political debates over taxation are typically dispiriting, devolving into empty platitudes about “skin in the game” or some malefactor’s missing “fair share.”
We would all benefit from taking a beat. Tax day can provide the occasion to contemplate not just the filing of our own returns, but the nature of fiscal relationship to the state. And at least for a few moments, we would be well served by simply contemplating that relationship rather than decrying its various, innumerable, undeniable shortcomings.
We might also profit from not immediately framing that contemplation in terms of what other people are paying. That’s a reasonable subject for interrogation — and it’s actually central to the notion of fiscal citizenship. But a focus on other people’s taxes can easily devolve into angry blame shifting and scapegoating. Initially, at least, we should approach tax day as a personal exercise in fiscal contemplation.
Withholding
It seems safe to say that our fiscal relationship with the state goes unexamined by most of us, most of the time. We can probably thank the wonders of withholding for that.
For all its administrative brilliance (and practical necessity), withholding does not encourage mindful taxpaying. Indeed, conservatives have been arguing for decades that withholding is the vital instrument of big government, creating an army of fiscal automatons mindlessly shoveling money into the gaping maw of a hungry Treasury.
Reason magazine made that point a few years ago when describing the role that conservative icon Milton Friedman played in the development of withholding. As a young Treasury staffer during World War II, Friedman had been part of the team that developed paycheck withholding — to his everlasting regret.
“I have no apologies for it, but I really wish we hadn’t found it necessary and I wish there were some way of abolishing withholding now,” Friedman told an interviewer.
In relating that comment, Reason editor Katherine Mangu-Ward echoed the same sentiment:
By making taxes relatively invisible and making paying them relatively painless, Friedman paved the way for the current status quo, in which significant portions of salaried workers’ incomes are handed over to state and federal governments without much fuss. Tax refunds, which feel like a delightful windfall to those who receive them, complicate the matter further by making many Americans feel like they are getting a gift on tax day, rather than giving their hard-earned money to the government under threat of violence.
Of course, withholding has many virtues, not the least of which is one that Friedman himself recognized in the 1940s: It’s a necessity for taxpayers of modest means, who would otherwise have a hard time staying current with their tax liabilities.
But it’s undeniable that withholding also diminishes tax salience — and with it, the occasions for tax mindfulness.
Thankfully, we still have tax day. The filing requirement is much reviled, and lawmakers have tried their best to minimize its societal burden by pushing more and more people outside the boundaries of the income tax. Some policymakers, like Sen. Rick Scott, R-Fla., may not like that trend, arguing that more Americans should have “skin in the game” (a problematic concept but one with a long history). (Prior analysis: Tax Notes Federal, Feb. 28, 2022, p. 1199.)
But the filing requirement also has its defenders. People like Lawrence Zelenak of Duke University Law School, who has suggested that “there is something to the notion of a mass return-based income tax as a promoter of fiscal citizenship.” (Prior analysis: Tax Notes Federal, Aug. 23, 2021, p. 1277.)
Indeed there is. Filing, even when it’s unpleasant and difficult, has virtues. Indeed, the unpleasantness can be a feature, not a bug, as I argued a long time ago in The New York Times.
When it comes to taxes, 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. Making taxes easy removes an impetus for Americans to force the government to do something about the tax code.
Don’t get me wrong. I’m not in favor of making filing needlessly difficult. But neither do I support the idea of making it disappear entirely. Some sort of annual filing ritual seems important, even vital, to the maintenance of fiscal citizenship.
I’ve written a lot about fiscal citizenship in recent years, often in the context of presidential tax returns. But briefly summarized, it’s a concept that describes the web of reciprocal rights and responsibilities linking a taxpayer to the state. Usually that taxpayer is an individual, but it might plausibly be a corporation, too.
The “reciprocal” part of the fiscal citizenship definition is crucial because the relationship represents a bargain. Justice Oliver Wendell Holmes Jr. implied as much in his famous dissent in Compania General de Tabacos de Filipinas v. Collector of Internal Revenue, 275 U.S. 87 (1927): “Taxes are what we pay for civilized society.”
If it’s a payment, it’s a bargain. Taxpayers give their money to the government, and in exchange, they get back protection, services, and the other public goods.
These payments to the government are generally not optional or contingent. As the Reason editor noted, they are made “under threat of violence,” or at least coercion.
But at the same time, taxpayers aren’t without rights in this relationship. Taxpaying is not strictly about coercion; it is mediated and limited by law, as well as politics (to the extent that those two can be distinguished from each other).
Ultimately, tax day provides an opportunity to contemplate all this — initially, at least, without judgment. Eventually, however, judgment is normal and appropriate in any political context. And done right, tax day can be the launching point for rethinking and reshaping the boundaries of fiscal citizenship.