Obligatory Tax Day Post

It's April 15th, and procrastinating Americans everywhere are rushing to get their tax returns in the mail (or frenetically trying to e-file). The normal spectacle of long lines at post offices that stay open until midnight for the occasion is being displaced today by the "tea parties" being held around the country to protest...something.

Taxes, I guess, although Barack Obama has yet to raise anything other than the cigarette tax (unless one considers deficit spending to be an increase in future taxes, in which case it's worth asking why these groups weren't teabagging the Bush White House). Some pundits have argued that the Republican brand is so tarnished that the party's fight against "socialism" has made socialism more popular (see Harold Meyerson). I wouldn't be surprised if a healthy percentage of Americans were relishing the opportunity to pay their taxes today, simply to thumb their noses at the Dick Armeys of the world.

In any event, a few thoughts on the paying of taxes. In this country, those who pay a lot in taxes are generally considered to be pretty fortunate (they've earned a lot of money), but in the midst of recession those paying a lot to the government are even more fortunate. This is a very blue collar recession, with job losses heavily concentrated in manufacturing and construction, while professionals -- and even financial workers -- have done pretty well. As Ed Glaeser recently wrote, the story of the ruined millionaire gets press coverage because it's rare, and therefore interesting; for the most part white collar professionals are still working, and still cutting checks to the IRS.

Another funny thing is the extent to which the American government goes out of its way to make paying taxes a real hassle. The government has (for the most part) your earnings information, and could send you a return (PDF) already filled out, which you could accept, sign, and mail back immediately if you didn't want to itemize or otherwise complicate your filing. And as the inevitable stories of tax cheats circulate this week it's worth observing that the Europeans do quite well raising revenue via the difficult-to-avoid, easy-for-citizens to pay VAT.

If there's one thing about the tax system that I find particularly galling, however, it's the government's failure to raise revenues in ways that would also serve to improve social welfare -- by taxing "bads" instead of "goods." Next time you're sitting in traffic, contemplate how congestion pricing could raise a lot of revenue and get rid of the traffic. Worried about obesity? Why not tax particularly unhealthy foods or drinks? It would raise money and save on health expenses, and it's less intrusive than outright bans on fatty foods or fast food chains. Something for Paul Volcker to consider while he's rewriting the tax code.