Tax Refunds are Bad

It’s tax time, so everyone is figuring out whether they get a refund or whether they owe some taxes. While it’s great to get a refund, and it’s a bummer to have to owe the government, you’re really better off owing something.

Why? Because when you get a tax refund, you’re not really getting a gift of money. You’re getting a refund of money that should never have been taken out of your paycheck in the first place. It is what it says: a refund of money you’ve already paid and shouldn’t have paid. The extra money that was taken out of your paycheck over the course of the year is money that you could have kept in a savings account and earned interest on. Or if you don’t have a savings account, it’s money that you could have used to buy groceries or other essentials.

Meanwhile, if you do your taxes and find out that you owe money, that means you’ve had the benefit of holding onto that money for the past year, earning interest on it, and so on, when it should have been taken out of your paycheck all along.

The only way it’s a bad thing is if you weren’t planning to owe money and you’ve already spent it and therefore can’t pay it. Or if you’ve already mentally “spent” your refund. Or if you owe too much money and the IRS charges you a penalty.

Psychologically, yeah, it’s much cooler to get some unexpected money from the IRS. But rationally, owing money instead of getting a refund isn’t as bad as it seems. So don’t feel too bad about it!

Tax Cuts

Someone from the Democratic Party called me last night asking for money, and I said no.

That’s only partly because I’d been receiving a slew of “Blocked” calls on my cell phone over the last few weeks from someone who had refused to leave a message, and when I finally decided to answer one of those blocked calls last night, it turned out to be the Democratic Party asking for money to fund a recount of the U.S. House race on Long Island. The main reason I wasn’t giving the Democrats any money, I explained to the guy on the phone politely, was that they don’t deserve it. A party that keeps ceding the initiative to the opposition isn’t getting my cash.

Which brings me to this: I am so tired of the debate over what to do about the Bush tax cuts.

First of all, the reason the 2001 Bush tax cuts were supposed to expire after 10 years was to get around the Byrd Rule, which allows any senator to block a piece of legislation if it will significantly increase the deficit beyond 10 years. Cap the tax cuts at 10 years (and hey, we’ll revisit the issue in 10 years, *wink wink*) and apparently there would magically be no deficit problem.

And now look at how the goalposts have moved. During the 2008 campaign, Obama wasn’t talking about letting the Bush tax cuts expire. He and the Democrats were talking about ending them early! Extending any of the Bush tax cuts wasn’t even being discussed. Thank you, Overton window.

Now everyone is saying, oh no, we can’t return to the Clinton-era tax rates, not in the middle of a recession! That will hurt everyone!

I would like to think this isn’t true. First of all: unemployed people don’t pay income taxes, so expiration of the tax cuts will not affect them. Second of all, if you have a job, there is no reason to spend less in a recession than you would spend in a good economy; you still have a job. Why should the general economy affect how much you spend? I know things don’t work that way — people spend less because they are afraid they will lose their jobs. Economics are subject to human psychology as much as anything else.

I am mixed on whether to let the tax cuts expire on income below $250,000, to be honest. But more tax cuts for rich people? No way.

To argue as the Republicans would, let’s talk about personal responsibility. Americans always knew the Bush tax cuts would expire after 10 years. They should have been planning for it all along. Tax rates were always going to go back up in 2011. If this tax increase takes you by surprise, that’s your own damn fault.

Not that the Republicans are arguing this, of course. All they really care about are protecting rich people, because tax cuts are always good, because tax cuts are the new religion and you’re not supposed to think rationally about religion, you’re just supposed to have faith that’s it’s true, and if you believe in it hard enough then it is true, and anyway that’s what their team believes and they’re always a part of their team.

And I certainly don’t expect the Democrats to do what’s right and let the tax cuts expire, or to even form a coherent message, one that couldn’t be easier to understand: Republicans are holding middle-class tax cuts hostage to their rich friends. Coherency? Hell — the Bush tax cuts passed in a Democrat-controlled Senate in 2001, and twelve Democratic senators wound up voting for them.

Early this year I decided to become less emotionally invested in politics. The turning point was when it looked like Scott Brown was going to beat Martha Coakley and the poor Democrats responded by quaking in their boots, promising to cave in on health care reform, because, oh noes, we can’t do anything with only 59 seats.

Health care reform eventually passed, but I had already given up. It was their attitude that did it for me. Even Barney Frank had talked about giving in. At that point I decided it wasn’t worth personally investing myself in the Democratic Party, emotionally or otherwise. I stopped thinking of the Democrats as “my team.” I would keep rooting for them, but I wasn’t going to feel personally hurt or embarrassed if they lost. I washed my hands of them.

I’ve felt a lot better since then.