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Wednesday, April 16, 2008

"Why the White House Doesn't Want to Modernize the IRS"

Do you find paying taxes to be "difficult, time-consuming, and infuriating"? Maybe that's no accident:

Why The White House Doesn't Want To Modernize The IRS, by Stan Collender: There have been lots of stories this week about the Bush administration threatening to veto a bill that would stop the IRS from using private collection agencies to collect unpaid taxes, about how using the private collection agencies somehow has cost the government money, and how the IRS doesn't seem to have requested enough resources to provide outstanding customer service.

All of this follows what is now a perennial story about how the modernization of the IRS computer system is still going very badly, is way way behind schedule (as in a decade or more), and is costing far in excess of what had been projected.

What's going on here?  Few Republicans in general (and especially the Bush White House) want to do anything that will make the tax paying experience easier, simpler, and more pleasurable because IRS is more efficient.

The result of all of the issues mentioned above is that paying taxes is more difficult, time-consuming, and infuriating.  That decreases support for paying taxes and increases the likelihood that tax cuts will be seen by a larger group of people as preferable.

Why not make customer service something that would get an award from JD Power?  Because you want people to find the tax system confusing and hard to comply with.

Why allow decades to go by on the computer project?  Because you don't want taxpayers to get quick answers.

Making paying taxes more difficult, time-consuming, and infuriating decreases support for paying taxes and increases that tax cuts will be an issue.  That plays directly to what most believe is a Republican political strength.

It also plays into the push for a flat tax.

Should Democrats make tax simplification and tax fairness bigger issues in their campaigns? This hasn't been a priority for me, but maybe I have a tin ear on this issue and a more aggressive push for simplification and more attention to perceived and real inequities would find a receptive audience.

As I've said, I think perceptions of fairness play a larger role in economic policy than economists have generally realized. Carbon taxes can be defeated by pointing out that they are unfair to truckers and farmers who have to use a lot of fuel due to the nature of their jobs. Never mind the economic arguments, that sells and this type of reaction is what Bush is hiding behind in his opposition to the imposition of a carbon tax, and in other matters (are estate taxes fair?). Here where I live, there was a proposal to fund health care with higher taxes on cigarettes. It was defeated because many people who supported the idea of expanded health care thought it was unfair to place the entire burden of funding the expansion on this group of people.

I think it's possible to explain why the Bush tax cuts have been unfair to the middle and bottom of the income distribution- the cuts have helped to distribute the gains from globalization and technical change to the upper income tier leaving those in the middle no better off or actually worse off in terms of the real wage they are receiving. Are we hearing that argument forcefully enough? Maybe, but it's been more about the fairness of trade agreements than the fairness of how gains have been distributed.

If Democrats want to capture middle America, I think they need to do a better job of tapping into the perceptions of unfairness that exist among middle and lower income households struggling to meet this months bills. Many in these groups, like it or not, see social programs and other government activities as unfair to them. Not all programs, and not all aspects of programs are viewed this way, but I'm convinced people are far less worried about issues such as moral hazard than they are about basic fairness. Why should they work hard every day at a job they absolutely hate only to see (or so they have been told) others having things handed to them? They've been told all the reasons why this is unfair to them - the right has been very good at this - and there's been no strong, countervailing voice to explain why the system is fair as it is, or more importantly to acknowledge and fix the cases where it isn't.

I don't mean that Democrats should play along with perceptions that are based upon falsehoods, misinterpretations, prejudices, and so on, but they do need to recognize that feelings of unfairness exist. Perhaps they are based upon faulty foundations, perhaps not, but the feelings are there. Next time your spouse comes home from work after a hard day and wants to vent, respond by analyzing why they shouldn't feel that way and see how they react. People don't want to hear an analysis of why they feel like they do, whether they are right or wrong to feel that way, they don't want to hear about how economic conditions or politicians have manipulated them into feeling a particular way about an issue. They give themselves more credit than that and believe, as you would in their shoes, that they are perfectly capable of coming to their own conclusions. The world through their eyes is not very fair in a lot of ways - people want to know that you understand that, and they want to know what you are going to do about it. Maybe I have this wrong - maybe Democrats do this already - but it seems to me they haven't played the fairness game as well as Republicans.


Are humans hardwired for fairness?, EurekAlert: Is fairness simply a ruse, something we adopt only when we secretly see an advantage in it for ourselves? Many psychologists have in recent years moved away from this purely utilitarian view, dismissing it as too simplistic. ...

UCLA psychologist Golnaz Tabibnia, and colleagues Ajay Satpute and Matthew Lieberman, used a psychological test called the “ultimatum game" to explore fairness and self-interest in the laboratory. In this particular version of the test... The idea was to make sure the subjects were responding to the fairness of the offer, not to the amount of the windfall. When they did this, and asked the subjects to rate themselves on scales of happiness and contempt, they had some interesting findings: Even when they stood to gain exactly the same dollar amount of free money, the subjects were much happier with the fair offers and much more disdainful of deals that were lopsided and self-centered.

The psychologists wanted to know if there is something inherently rewarding about being treated decently. So, they scanned several parts of the participants’ brains while they were in the act of weighing both fair and miserly offers. Consistent with previous results, the researchers found that a region previously associated with negative emotions such as moral disgust (the anterior insula) was activated during unfair treatment. However, interestingly, they also found that regions associated with reward (including the ventral striatum) were activated during fair treatment even though there was no additional money to be gained.

As reported in the April issue of the journal Psychological Science, ... the brain finds self-serving behavior emotionally unpleasant, but a different bundle of neurons also finds genuine fairness uplifting. What’s more, these emotional firings occur in brain structures that are fast and automatic, so it appears that the emotional brain is overruling the more deliberate, rational mind. Faced with a conflict, the brain’s default position is to demand a fair deal.

Furthermore, when the scientists scanned the brains of those who were “swallowing their pride” for the sake of cash, the brain showed a distinctive pattern of neuronal activity. It appears that the unconscious mind can temporarily damp down the brain’s contempt response, in effect allowing the rational, utilitarian brain to rule, at least momentarily.

    Posted by on Wednesday, April 16, 2008 at 11:39 AM in Economics, Politics, Taxes | Permalink  TrackBack (0)  Comments (34)


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