ByRYAN SAGER
About taxation, Louis XIV s> finance minister, Jean-Baptiste Colbert, once said that the art is in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing. As April 15 approaches, you the taxpayer may indeed feel like hissing. Taxes are so painfully complex that roughly 60% of Americans pay someone else to prepare their returns, at a cost of hundreds of billions of dollars per year. Still others rely on computer software. The rest pay in headaches and tears.
But as you contemplate this annual toll in tears and treasure, it s worth reflecting: Is the pain, perhaps, worth it? Is it a needless annoyance, or is it a needed reminder of the cost of government? Is the pain, in other words, one of the few things saving you from being plucked bare and converted into a down comforter?
The question of whether it should be easy or hard for people to pay their taxes is, to an extent most people don t realize, an ideological one. Dating back to John Stuart Mill s 1848 Principles of Political Economy, there has been an understanding that a less visible tax system may have a tendency to fuel the growth of government. The less the goose feels the plucking, after all, the more feathers the pluckers can collect.
Government officials know this quite well. In 1942, discussing proposed changes to how the federal government collected taxes at a Senate hearing, treasury official Randolph Paul wondered aloud, regarding income tax withholding, whether if we cut down the squawking under this method we could raise the individual tax rates? Withholding was instituted, the squawking was cut down, and taxes indeed have risen as a share of GDP.
Of course, the problem is proving causation it s impossible to say whether American tax rates would have risen as high in the absence of income-tax withholding. But can we get closer to showing empirically that it s people not feeling a tax that gives government license to jack it up?
Enter a clever recent study by economist Amy Finkelstein at MIT. In a paper published in the Quarterly Journal of Economics in 2009, Finkelstein looked at the behavior of drivers before and after an electronic toll collection system was implemented at 123 toll plazas. These systems (such as EZ-Pass in the Northeast and Fast-Trak in California) give drivers an electronic transponder to keep in their cars; tolls are then debited from preloaded accounts or deducted from a linked credit card.
The idea, of course, is to make paying tolls much easier and faster no more scrounging around for change under the passenger seat, and (perhaps more important to the toll-collecting agencies) no more counting out of how much the toll costs.
So, Finkelstein wanted to know: Would these pain-free, or at least pain-reduced, toll-collection systems lead to higher tolls?
Not to keep you in suspense: The answer is yes. Tolls at booths where the electronic toll collection systems were implemented jumped an estimated 20% to 40% higher than they would have otherwise.
Why is that?
One reason is that a system like EZ-Pass makes people somewhat less aware of the amount of the tolls they re paying. Finkelstein and her team conducted two surveys: one of people who had driven to an antique show in western Massachusetts on the Massachusetts Turnpike, another of New Jersey commuters who used any of the six bridges or tunnels that cross the Hudson river into New York City. When asked what tolls they paid, 62% of drivers in the Massachusetts survey who d paid electronically said they didn t know; only 2% of drivers who d paid cash didn t know. In the New York survey, roughly 40% of electronic users said they didn t know, versus 20% of cash users.
But was there a nexus, Finkelstein wanted to know, between this lack of knowledge and the increase in the tolls? By one measure, at least, it seems there was: With the implementation of electronic tolls, the timing of toll increases was suddenly much less responsive to the political calendar particularly legislative elections.
Does this mean we shouldn t expand the expand the idea of EZ-Pass to create an EZ-Tax system, where the government would use the data it already has on us to fill out our tax forms as countries such as Denmark, Belgium, Chile, Portugal, Spain, and France are trying leaving us to simply sign and send money?
It depends on our priorities. If our priority is to experience as little pain from taxes as possible, we could go down the road California is on with its ReadyReturn program, available to people with income only from wages and only one employer. From the 60,000 people who used it to file prefilled returns in the 2008 tax year, it got Saddam Hussein levels of support: 99% said they d use it again.
If our goal is to hold onto a little more of our money, though, remember: Swearing s been shown to alleviate pain. So, bear down, swear away, and don t get plucked any more than absolutely necessary.
Ryan Sager writes the blog Neuroworld at TrueSlant.com.>



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