This year April 18 is the end of the ordinary window for paying income taxes to federal and state governments. Paying income taxes may be a necessary part of civic life, but that payment should be timed and structured to promote government accountability. Unfortunately, but not surprisingly, our politicians have made it difficult for citizens to be conscious of how much they are paying for government services at the time when it would most count—election day.
First, the ordinary window for tax payments—from January 1 to April 15—makes the act of paying taxes a distant memory by the time the first Tuesday in November rolls around. It does not take a behavioral economist to recognize that paying taxes closer to the election would make voters focus on whether they are getting value for money from government. Thus, the ordinary payment window should be changed to the month before the November election.
Second, as a result of withholding, most voters get a refund from the government when they file their taxes. This process also makes them less conscious of the tax burden, since most do not actually write a check to the government, but instead get a check from the government. Thus, withholding should be modified to make citizens feel the effect of taxes.
It might be objected that without withholding many citizens would not be able to pay the lump sum to discharge their tax obligations. If so, this inability would be a troubling fact about democracy: we trust people to determine who will dispose of other people’s money, when they cannot handle their own finances! But even if withholding were not eliminated, cutting withholding by a half or even a third would help people be more conscious of taxes without requiring most to come up with huge sums of money for tax payments.
Taxes may be the price we pay for civilization, but they also burden liberty. Getting the right balance between government services and taxes is one of the most important decisions in a democracy. Our tax system should be designed to help citizens make an informed one.