Tax policy has moved toward the top of the political agenda in Washington, D.C. To help pay for its ambitious domestic agenda, the Biden administration wants to, among other things, raise the top income tax rate to 39.6% from its current 37%.
In "A History of Taxation and Expenditure in the Western World," authors Carolyn Webber and Aaron Wildavsky contend that the income tax is "a paradigm of responsive democracy at work." I like that idea.
In a somewhat similar vein, preparing your taxes is a paradigm of the household budget at work. It's an opportune moment to take stock of household finances, to think about your household budget and to look closely at longer-term goals. After all, you have gathered much of the financial information you will need for a detailed household income-and-spending review. There is a wealth of household information to tap within a tax return, including your income, investments, many expenses and charitable giving.
What's more, while you are engaged with taxes, you should review your retirement savings plans and any college savings plans. Are you taking full advantage of the tax-shelter incentives built into the tax code to encourage saving for retirement or your children's college education?
Armed with your tax foundation information, you are now well-positioned to step back and ask some of the bigger questions about how you are handling money. For example, where would you like to be financially one year, three years, a decade from now? If you want to change jobs or careers, will your finances support the costs of transition? Answers to questions like these can help shape future money decisions.
For further help, consult a good personal finance book, the kind that will encourage a broader look at your relationship with money.
Among books to consider: "The One-Page Financial Plan: A Simple Way to Be Smart About Your Money" by Carl Richards, certified financial planner and New York Times columnist; "The Index Card: Why Personal Finance Doesn't Have to Be Complicated," by Harold Pollack and Helaine Olen, an academic and columnist, respectively; and "This Is the Year I Put My Financial Life in Order," by John Schwartz, a New York Times reporter.
One final tax note. While Tax Day has been delayed until May 17 this year, you should file as quickly as possible if you are owed a refund to get the money into your bank account. Do you owe? There is no need to rush.
Chris Farrell is senior economics contributor, "Marketplace," and Minnesota Public Radio.