Thursday, August 13, 2009

More on coins

Geeky Mom writes:

Yesterday, I filled a bag with about half of the coins and trudge to the bank on my way to the farmer's market. The bank lets you estimate how much money you have and if you're close, you win a prize. As I poured the money into the machine, I saw mostly pennies. So, I estimated about 7.50. When it was all said in done, I had slightly over $52 in coins. Mostly dimes, it turned out. I'm really bad at estimating, especially now that I rarely handle cash, much less coins. All my cash is digital, exchanged either via electronic transfer or similarly, using my debit card. I used to keep tips in a mayonnaise jar on my dresser, saving up for the deposit on an apartment in graduate school town. I know about how much was there, in part because I knew how much I made in tips, but also because I dealt with cash all the time.

I spent a little more than half of my new found cash at the farmer's market. Even though I always take cash there (most of the vendors don't take other forms of payment), I felt a little giddy at having such a large amount, created, it seemed, out of thin air.

Money now does seem to come out of thin air, arriving in bank accounts without anyone having to touch anything. I used to work at a bank during the summers. One summer I filed loan applications, the 3 attached parts left after everything was signed off. Another summer I filed the checks people deposited into their accounts, checks that were then sent to other banks to be filed and then placed in an envelope to be sent to the customer with her statement. Even then, the real transaction happened electronically, with a machine reading routing and account numbers, a human inputting the amounts, which were then coded onto the check to be read by another machine. For a brief time each summer, it was my job to count money coming in from the vendors at the annual summer festival. Bags of coins and dollar bills showed up at the bank and I stood behind the tellers, counting it all by hand, recording amounts on deposit slips, amounts that were later entered into computers while the money itself went into the vault, to be redistributed to banks or to customers withdrawing money.

Her post captures how a lot of people have lost touch with their "number sense" about money, because most monetary transactions are about electrons zapping around from place to place.

It's actually very hard to pay your income tax bill in cash. Even if you walk into one of the few remaining IRS taxpayer assistance centers with a wad of twenty dollar bills trying to pay off your tax bill, they are reluctant to accept it. Basically, the IRS is just not set up to take cash. They really want you to use their electronic payments system or mail them a check. And don't even think about trying to pay your tax bill with a wheelbarrel full of pennies!

Ideally, what makes it as simple as possible for the IRS is for your employer to (slightly) overpay your taxes through withholding from your wages throughout the year, and then they'll send you a refund (preferably by direct deposit) after you file your tax return at the end of the year.

Today's Wall Street Journal has an op-ed from Charles Murray saying that this approach is "bad for Democracy."

He proposes that we replace the current system under which most American pay most of their taxes through withholding from their wages with a system under which all American taxpayers would instead just send in quarterly tax payments to the IRS.

You can read more about this in two recent posts on my tax policy blog.

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