What Taxes Can Teach us About Management - Morning Star Self-Management Institute

Jan 1, 2012
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Self Management Institute
What Taxes Can Teach us About Management

Why does it seem that people hate paying taxes?  Taxes are a pretty divisive issue politically, at least here in the United States; some think taxes should be higher, some that they should be lower.  But I've never met anyone who was excited about paying taxes.  Why?

I have two hypotheses:

First, free-will is important.  At some level, I believe that everyone wants freedom of choice over what they do.  Taxes aren't exempt from our drive to have control over those things that are important to us.  It was the fuse that set off the American revolution; "No taxation without representation" was essentially a rallying cry for those who wanted at least representative control over the taxes they were to pay. 

As evidence, in a 2001 poll, the Internal Revenue Service (IRS) was ranked as the least favorable government agency (out of 20 total agencies--ranging from NASA to the CIA to BATF).  In a 1996 Roper poll, 66% of respondents indicated that they felt either "Dissatisfied", "Angry" or "Boiling" when asked about doing their taxes.  Interestingly, though, when asked what bothered them most about taxes, 71% of respondents indicated they were more bothered by how the government used their taxes than they were about the amount they paid in taxes.  It's a control issue; it's the idea that "this is my money, and you can never do as good a job as I can in spending it". 

Second, I think most people are accustomed to the traditional "customer/supplier" relationship.  We are conditioned to expect an exchange in most commercial relationships: we give money in exchange for goods and services--or we provide goods and services in exchange for money.  We like the idea of trade, and it's the basis of our commercial interactions. 

But Americans long ago stopped acting as if taxes were simply an exchange of money for government services.  There's clearly a portion of the taxes that are paid that represent each payer's proportional costs for some public services, but there's also a transfer of wealth mechanism that involves those with higher income paying for programs benefitting those with lower incomes.

A 2011 poll of Americans found that 60% of taxpayers felt that they were getting "a bad deal" when asked what they felt about the government services they receive in exchange for their taxes.  This notion of exchange is an important one; people like to feel that they're getting what they pay for; and people don't like to pay for things they aren't getting. 

I'm not interested in a political argument here--the issue here isn't whether we should pay more or less in taxes; the issue is the remarkably negative sentiment that most Americans seem to have regarding taxes.  I know this idea of "exchange" is a hairy one; someone will say that, in an abstract sense, the wealth transfer mechanism is a payment for the government's service of providing a civilized, first-world society; and someone else will argue that government doesn't have a monopoly on doing things to eliminate poverty, taking care of destitute children and providing access to education.  I don't want to have that argument here; the simple point here is that there is general dissatisfaction with the "deal" people feel they're getting; they feel it's not a fair exchange.

So what does this imply about human psychology, and more specifically, about human organizations?  First, that the idea of control is an important one; people hate being forced to do something--even if it's something they would otherwise probably want to do.  I should point out that even the most anarchist anti-governement folks out there value safety, harmony, a civil society, overall human happiness.  Nobody wants a country devoid of those things.  And there are countless Americans who, on one hand, bemoan the taxes they pay, and on the other, give impressive amounts of money to charities that work every day to solve human problems all over the world; people don't have a problem investing in things to make the world a better place--they just want to be able to make the decision on their own.

And people in our organizations simply want to be able to have control over how they do what they do.  I've found that if people really, truly have freedom of control over their work, they tend to flourish.  And, interestingly, you can often approach them and propose a change in the way they're doing things--propose it using reason instead of force--and they'll usually change what they're doing, quite willingly, by choice.  Control over others is not the only way to accomplish things in organizations: it's expedient, but the societal side-effects are terrible. 

And the idea of choice: people don't want to be trapped in a relationship that's not a real exchange.  If they aren't getting their money's worth, they want alternatives.  If their public school isn't doing a good job of educating their children, they want to be able to take the money they pay for public schooling, and use it to pay for a private school. 

The same is true in an organization: people should understand that if they aren't receiving excellent service from others within your organization, they have the option to seek out an alternative way to achieve their mission.  The organizational structure cannot be so rigid that the notion of choice is foreign.  There's a beautiful tension that arises when all parties understand that we have choices--we have alternatives.  Suppliers become focused on providing excellence in service, and customers are more engaged, because they know they aren't captive to their current supplier.