Do You Get Warm, Fuzzy Feelings When Paying Taxes?
MICHEL MARTIN, HOST:
I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, it's National Poetry Month and we are celebrating with you by inviting you to send us your poems on Twitter. We'll check in with poet Holly Bass to get her progress reports on the tweets we've been getting for our series. It's called Muses and Metaphor and that conversation will be in just a few minutes.
But, first, we want to check in on matters of personal finance. And if you've been listening to the program and you get the feeling that you're forgetting something important, then you should probably look at your checklist or your checkbook and see if you put a mark next to that reminder about your taxes. Once again, if you haven't filed your federal taxes, you have until tomorrow at midnight to get them in. That's April 17th this year.
But, if tax time doesn't give you that warm and fuzzy feeling, you are not alone. Our next guest says Americans have always had mixed emotions when it comes to paying taxes. And over the years, attitudes about paying taxes have actually been souring, if you can imagine that.
Joseph Thorndike is the co-author of "War and Taxes." He is a columnist for Tax Analysts. That's a non-for-profit group that's dedicated to covering tax-related issues.
Joseph Thorndike, thanks so much for joining us.
JOSEPH THORNDIKE: Oh, it's my pleasure.
MARTIN: Remind us again why and how income taxes in the U.S. were established. As I recall, it was around the time of the Civil War.
THORNDIKE: Well, the first run through with income taxes was during the Civil War and it was mostly in an effort to - well, one, raise money, as you would expect - but also to make the tax system a little bit more fair. Most taxes back at that point were in the form of tariff duties, and those are really regressive. They fall heavily on poor people.
So Congress came up with an income tax as a way to sort of balance the scales of fiscal justice, you know, to move more of the burden up the income scale.
MARTIN: Tariff duties are what? Are taxes you pay on anything that you use that's imported?
THORNDIKE: Anything imported, for the most part. I mean, you know, sometimes they give a free ride to a couple of goods, but basically on imported things. Yeah.
MARTIN: What was the feeling back then, when the taxes were first imposed? Do we know? I know they didn't have public opinion polling, but I'm sure there was some way to figure out how people felt about this.
THORNDIKE: Well, you know, I think what we can divine from looking at how people reacted to it, is that it was pretty well tolerated at the time. For people who didn't like the tariff, it was a good idea, so that would be farmers and westerners, for the most part. People who were inclined to not like the income tax - those would be people in New England, because they paid most of the income taxes back then.
But, by and large, the tax was pretty well tolerated throughout the war. And that's a pretty typical phenomenon that we see in American history, is that, during the war, taxes are pretty well tolerated. That tolerance starts to decline over the course of the war as the war wears on and as sort of the end of the war is into sight. And, eventually, people get, sort of, worn out on war taxes and there's usually retrenchment afterwards.
MARTIN: You said, in your book that, during World War I and II, that there was a sense of duty to pay one's taxes. It was considered part of your contribution to the war effort. In more recent conflicts, was that also the same?
THORNDIKE: Well, you know, I think the issue with wars and taxes are that you have to sell the war and then that pretty much sells the taxes for you. So both World War I, and especially World War II, were seen, I think, as just wars and they were overwhelmingly approved by, you know, Americans. They thought they had to be fighting this war. It was the right war to be fighting. We're doing the right thing. That makes the taxes go over pretty well.
Later wars, Korea and then especially in Vietnam and then again in more recent wars like Afghanistan and Iraq, there's less consensus about the need to fight the war and, therefore, I think the taxes are a little less well tolerated.
Then there's the question of how people feel about paying taxes in peace time. And I think that, in some ways, it's the same phenomenon. You know, I said you have to sell the war before you can sell the taxes. Well, in peace time, you have to be able to sell the government before you can sell the taxes. And so, if government sort of falls into disrepute, then the taxes that pay for it do at the same time.
MARTIN: I'm speaking with Joseph Thorndike of Tax Analysts. That's an organization that covers tax-related issues. He's also co-author of "War and Taxes." It's a history of tax policy. And we're talking about public opinion around taxes, because it's tax time.
And tax policy is getting a lot of attention, also, these days, because it's an election year and also because President Obama has been, you know, renewing his call to ensure that the wealthiest Americans pay what he would call their fair share.
He's been advocating something called the Buffet Rule, named for billionaire Warren Buffett, that would call for millionaires to pay nearly 30 percent of their income, you know, in taxes.
Is there something about that million threshold that has meaning?
THORNDIKE: Well, there certainly is right now. People are sort of fixated on that notion of a million dollars and, of course, it's also - it's sort of a misuse of the term. Right?
A millionaire's tax would be the tax that applied to anyone who had $1 million, right? And that's not $1 million in income, that's a very different group of people. But for whatever reason, we've all sort of fixated on this millionaire's tax. And, you know, the truth is, in past years, in past decades - a long time ago, some of them - we had special tax rules, special brackets for superrich people. So, you know, we want to have a tax now that applies to someone who makes $1 million in income a year. But we used to have a special bracket that applied to people who were making the equivalent of like $77 million a year. So, you know, we used to have super brackets. We didn't have this notion that you we only needed five. We used to have 35 brackets, for instance, you know, tons and tons of them, because we wanted to make, you know, we wanted to differentiate between people who are not rich and sort of rich and very rich and obscenely rich. And we don't make those distinctions anymore.
MARTIN: How come?
THORNDIKE: You know, there's a notion that fewer brackets equals simplicity. Although, I think that that's really wrong. You know, the number brackets really has nothing to do with how complex the tax system is. We want fewer brackets as part of our notion of, you know, a better tax system. To me it's a mistake.
MARTIN: You know, groups like the Tea Party have really advanced this notion that taxes are theft, and that, really, the issue is that the government takes in too much money and they've make it a moral issue on their side of the equation. Their argument is that this kind of is part of an overreaching government that digs too deeply into people's - not just people's wallets - but their lives. And they've made it, kind of, a moral argument around, sort of, taxation. And there's a further, sort of, iteration of it that too much tax is too much debt. It's also debt, you know, federal debt as a moral issue too. And I'm just interested in this, sort of, notion of taxes as a moral issue, on the other side of the equation, that too much taxation is a moral issue. And I'm interested in where the origin of that thought comes from.
THORNDIKE: Well, you know, it seems to me that the right way to think about taxes is really very simple. It's that the price that we pay for civilization. That's - I'm ripping off that quote from Oliver Wendell Holmes. But I think that's really the right way to think about it. We have to make two decisions. We have to decide how much civilization - by which I mean, how much government do we want? You know? And that includes what do we want it to do and how should it do it. But how big a government do we want? And then once we decide that question we have to decide how to pay for it. To me those are really two separate questions. So I think that, you know, cutting taxes as a way to shrink government is putting the cart before the horse - or some other metaphor. It's just the wrong way to go about it. We are avoiding the real argument, which is if you think that a big government is too overbearing and too intrusive and is a threat to freedom, well then make that argument straightforwardly and talk about what parts of government you want to be smaller or you want to go away entirely. Then we can talk about how much money we need to pay for it.
MARTIN: Before we let you go, I'm not going to ask you when you filed. I'm going to assume that you did file. And are you one of these guys whose like running down to the post office at midnight when they've got the people standing out there with, you know, vests to take care of last-minute filing and playing bands and whatnot like that? This is all reporting, by the way. This is not me.
THORNDIKE: Right. Right.
MARTIN: I'm just, I seen this. I read about it.
THORNDIKE: No. You know, I...
MARTIN: Or are you one of these guys who like on February 1? And how did you feel about it whenever you file? Do you feel good. Do you feel ah, another one?
THORNDIKE: I file an extension every year, so...
(SOUNDBITE OF LAUGHTER)
THORNDIKE: You know, there's no shame in that. I know plenty of tax professionals who all file extensions every year. And, you know, the other thing is I describe April 15th as an anti-holiday of sorts, right? It's a shared experience for all Americans. We know what it's like, right? That's part of citizenship is that moment of misery when we all have to pay our taxes. It's been diluted in recent years, because most people don't fill out their own tax reforms by the - their tax forms anymore. They either get help from an accountant or some other paid preparer, or they use software, and then you file it online. So, you know, it's not that same thing. They don't have - the whole band at the post office thing, that's a dying tradition. I'm sort of sad to see it go.
MARTIN: And played out.
(SOUNDBITE OF LAUGHTER)
MARTIN: OK. Joseph Thorndike is the co-author of "War and Taxes." He's also a columnist for "Tax Analysts." That's a not-for-profit group dedicated to covering tax-related issues. And he was kind enough to join us from Charlottesville, Virginia.
Mr. Thorndike, thanks so much for speaking with us.
THORNDIKE: Oh, it was great fun.
(SOUNDBITE OF MUSIC)
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