Last-Minute Tax Tips

A plan to get you excited about taxes

Marketplace Staff Apr 5, 2010
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Last-Minute Tax Tips

A plan to get you excited about taxes

Marketplace Staff Apr 5, 2010
HTML EMBED:
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TEXT OF INTERVIEW

Kai Ryssdal: With just 10 days to go until taxes are due, we get this tidbit from Bankrate.com. Their research shows only 7 percent of Americans plan to blow their refunds on something fun. The rest of us are going to do some distinctly non-fun but probably prudent things, like pay down debt, covering food and utility bills, even saving and investing too.

Whatever your plans are, the government obviously has an interest in making sure you file accurately and on time. Changing our tax-paying behavior is a natural topic for Duke University’s Dan Ariely. Dan, it’s good to have you back.

DAN ARIELY: My pleasure.

Ryssdal: I am proud to tell you that I basically am net, net zero on my taxes. Had a little refund coming, owed a little bit to the Feds, so we’re all set in my house.

ARIELY: That’s a very nice feeling. I actually had a really miserable weekend.

Ryssdal: I’m sorry.

ARIELY: I tried to find all the receipts. I tried to log into my bank and find out all the transactions I did for the last year. It was really miserable. And actually I thought about it, you know, when I first filled the 10EZ form, when I was a grad student, I thought what a wonderful day to, as an exercise of citizenship, to reflect about your role in society, what you’re taking, what you’re giving and so on. But once I moved away from the 1040EZ form, it became less of an exercise of citizenship and more I’m just annoyed, I’m just annoyed, I’m just pissed off with all this rule and regulations and the lack of clarity in how to fill everything.

Ryssdal: All right, so, enlighten us, what’s your plan?

ARIELY: So I think first of all the idea of simplifying taxes is really important from that perspective, but the second thing is that I think we should actually let people reflect on what their taxes are doing. So imagine how we could encourage that. What we could be doing is to get people to vote on how a small part of their taxes will be distributed — maybe 5 percent, maybe 3 percent — where I would give you a list of all the public service that the government is responsible for, and you decide how to allocate your money. Now, it’s not so much just for the allocation decision, but for the reflection, thinking about what do we do in society, what do taxes go for. You might be incredibly upset with the government, you might be incredibly pleased, but the important thing is to get this exercise of thinking where taxes go.

Ryssdal: What about the people who either underpay or don’t pay their taxes, right? I mean, the folks who cheat. Do they still get to vote?

ARIELY: Well, the reality is that if you didn’t let people who cheat on their taxes vote, nobody would be there to vote. I mean just look at the Obama administration. When the Obama administration came to power we discovered that lots of people in that administration under-reported their taxes.

Ryssdal: The secretary of the Treasury and a couple of others, yeah.

ARIELY: For example. So actually cheating on taxes is something that is incredibly general, and I think again it has to do with the complexity of the tax code. You go to dinner with your aunt, and she asks you how work was going and you told her about some interview and she gave you some good ideas — you know, what can you deduct now. The reality is that the tax code is so confusing, and there’s some many gray zones that I think lots of people are taking these gray zones and stretching them slightly more in a selfishly convenient way.

Ryssdal: You would absolutely expect that though, right? As a guy who studies behavioral economics, you would expect people to take advantage of those gray zones.

ARIELY: That’s right. So what we generally find is that people want to optimize two goals: We want to think of ourselves as good, honorable people, and we want to benefit from cheating. And under normal circumstances, you would say, you can’t get both of those. You’re either honest or you benefit from cheating. But it turns out that as long as we cheat just a little bit, we can benefit from both of those. How? We can still think of ourselves as honest, and we can still cheat — just a little bit. But under those conditions we basically get to still think of ourselves as wonderful people.

Ryssdal: Dan Ariely is a wonderful person. He teaches behavioral economics at Duke University. His book is called “Predictably Irrational.” Dan, thanks a lot.

ARIELY: My pleasure. And I don’t want to be audited this year.

Ryssdal: No, no. Of course not. Of course not.

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