The paradox of taxes- can losers also be winners?

“I like to pay taxes. With them, I buy civilization.”

― Oliver Wendell Holmes Jr.

Why are income taxes so unpopular? As a CPA and tax preparer, I've noticed that even as rates have gone down, people still complain about income taxes and the IRS just as much as ever. Meanwhile, the tax code has gotten more and more complex.

Since the 1980s, federal tax cuts have substantially lowered rates, particularly for high earners. At the state level, the trend is even more aggressive; over half of U.S. states have cut income taxes since 2021, and nine have eliminated them entirely. Missouri is now following suit, aiming to phase out its income tax in favor of expanded sales taxes. But why this shift, and why now?

The answer lies in human psychology. In many ways, our brains are hardwired to loathe income taxes. We suffer from a cognitive distortion known as loss aversion—a behavioral economic principle suggesting that the psychological pain of losing something is twice as powerful as the pleasure of gaining an equal amount.

When we earn money, we feel a "win." When the government carves a chunk out of a paycheck before we even touch it, it feels like a visceral loss. This makes supporting government services—which most of us agree with in theory—a psychological "pain point." For those with the resources to avoid that pain, tax season becomes a high-stakes game of avoidance.

Sales taxes present an inviting, if deceptive alternative. Because these transactions are ostensibly voluntary, they bypass the immediate sting of loss aversion. You pay the tax, but you walk away with a product you wanted. However, this is often a fiscal shell game. Sales taxes are regressive; they consume a much larger percentage of a low-income family’s budget than a wealthy person's. If you keep more of your paycheck but lose it all (and then some) to higher costs for basic goods, are you truly better off?

I understand the distaste for income taxes, but Missouri’s push to replace them with punitive sales taxes threatens our most basic infrastructure. This is happening at a precarious moment: federal pandemic-era funds are drying up, and Missouri schools are facing drastic budget cuts.

Who benefits from this shift? Follow the money. This repeal is championed by well-funded interest groups like the Koch-backed Americans for Prosperity and a small circle of wealthy donors. For the ultra-wealthy, loss aversion is turbocharged. When your identity is tied to your net worth, any tax is viewed as an existential threat. Furthermore, the "top 10%" often believe they are immune to the need for public services. If your children attend private academies, a shortfall in public education funding feels like someone else’s problem.

This extreme aversion has dictated American politics for fifty years. It is why "trickle-down" economics is resurrected every time it fails, and why the disastrous 2012 Kansas tax-cut experiment is being ignored because this time it will turn out different. It is also why the "balanced budget" party now embraces massive deficits because it was the only way politically to get what they wanted. Now with the national debt bigger than the entire US economy, they're having to go after what's left of the safety net.

Taxes are the price of a functioning civilization. Like any good conservative, I hate to see fraud and waste with my tax dollars, and wish all governments treated them as a sacred trust, not a way to enrich their donors. And like any good liberal, I hate to see friends and neighbors struggling when fair and efficient programs could lift them up and make them happy and productive again.

My parents were from the Greatest Generation, and they paid significantly higher taxes than we do today. Their generation won a war, balanced budgets, and built one of the greatest economies the world has ever seen. It's not about the taxes. It's about scared rich people clinging to their security portfolios.

We live in one of the lowest-taxed states in a low-tax era, yet national morale is at an all-time low. Perhaps the issue isn't the tax itself, but our perspective. If we stop viewing income taxes as a "loss" and start seeing them as a collective investment in research, education, and disaster prevention and recovery, we realize it isn't a zero-sum game. When the foundation is strong, everybody wins.