The Tax Withholding Ripoff

Fox News.com, the agitator.com ^ | 7/3/2003 | Radley Balko

[StoneColdTaxHater]

This is how the government has been ripping us off since 1943. As a people we need to stoip this insanity and get the power back in OUR hands.

[Conspiracy Guy]

Oh stoip it.

[Pikachu_Dad]

(sarcasm on) Oh, right. Sure thing. Will get right on it. (sarcasm off)

[Hank Kerchief]

The Article:

Sixty years ago this week, the federal government passed the Current Tax Payment Act (search), arguably the most nefarious, misleading and ultimately destructive piece of legislation passed in the United States within the last century.

If you care at all about limited government, that’s not an exaggeration. The CTPA is what you and I have come to know as federal income tax withholding (search), and it’s a big reason why so many of us today sit by idly and submit to an ever-expanding federal government leviathan.

Professor Charlotte Twight (search) has done exhaustive research on the history of federal tax withholding, and documented it in her book Dependent on D.C. and in a shorter article for the Cato Institute.

Like most massive expansions of federal power, the CTPA was passed in wartime, and under the banner of patriotism and sacrifice for our boys overseas (lessons from history we’d be well-advised to heed today). Twight details a massive public relations campaign directed by the Treasury Department (search) that employed clergy, celebrities, and even Donald Duck to pitch the benefits of this new “convenience.”

The CTPA was pushed on the public with at least the implication that it would be temporary. Taxpayers were promised a one-year “recess” from federal income taxes as a carrot for allowing withholding, though most economists at the time agreed that the alleged recess was dubious. In any event, taxpayers were told, withholding was in many ways a blessing. No more worries about saving enough money for Tax Day. Now, government would do your saving for you.

In truth, most every politician and Washington bureaucrat (search) knew at the time that the public face of the CTPA campaign was decidedly at odds with the real motivation behind its passing. Withholding would put the burden of tax collection on employers. It would make federal tax collection easier. It would make raising taxes easier. And, consequently, it would make it easier for Congress to spend.

Most deceitfully -- and brilliantly -- withholding prematurely takes money from taxpayers, allows the federal government to collect interest on it, then returns the principle to us in April, under the misnomer of a “refund.”

Surprise! No longer would Americans look forward to Tax Day with dread and gloom. No longer might we use April 15 as an opportunity to determine if services we’re getting from our government adequately reflect what it’s billing us. Once the CTPA passed in 1943, Tax Day turned into Christmas. A nationwide birthday. A card from Uncle Sam (search) with a check inside. Free money on tax day? What a country!

According to research from both the Cato Institute and the accounting firm Ernst & Young, between the time withholding was passed in 1943 and the time it was fully implemented in 1945, six million Americans were added to the tax rolls. The federal government collected $43 billion in additional revenue. Between 1940 and 1950, federal revenues as percentage of the Gross Domestic Product more than doubled, and federal revenue per capita jumped 400 percent, the biggest 10-year jump for both categories in the 20th century.

And that’s exactly what was supposed to happen. Tax collection got easier. Government got richer. And we’ve been spending ever since.

Today, with a Republican in the White House and with Republicans (search) controlling both houses of Congress, the federal government still grows unabated. Even discounting for defense and homeland security (search), federal spending as percentage of GDP is at its highest level in 25 years. And that’s not including the looming prescription drug benefit -- yet another entitlement program now priced at $400 billion, but that will inevitably swell skyward from there.

It’s a scary thought. Not only is our government getting bigger, it’s growing faster than the economy. Every year, the amount of money the federal government spends gets just a little closer to the total amount of total money spent everywhere else.

It really doesn’t matter who’s in office (contrary to what you might think, Republican presidents have generally been bigger spenders than Democrats (search)). We’ve allowed our government to install a system whereby taxes are collected on the sly, but the benefits they pay for are delivered with pomp and parade. It will always be more palatable, then, for politicians to soak oblivious taxpayers than to end benefits for constituencies who are anything but oblivious to their entitlements.

The only remedy is to change the system, to find a way of funding our government that offers more accountability, and makes it less politically poisonous for our elected officials to close the checkbook from time to time.

It’s a pipe dream, I know. Asking our elected officials to voluntarily give up power they filched from us years ago seems downright delusional. But every now and then, American politics undergoes a sea change. And every now and then, like a blind piglet, a politician gropes around and per chance latches on to the teat of principle. Despite spending at rates that exceed its Democratic predecessor, the Bush administration has at least toyed with the idea of meaningful reform of the tax code (search), though the White House has made clear that such reform would be a “second term” issue.

Perhaps if we’re so lucky, withholding, or even an end to the income tax, makes it onto the agenda.

Radley Balko is a writer living in Arlington, Va. He also maintains a Weblog at www.theagitator.com.

[RockDoc]

Wednesday, July 02, 2003
By Radley Balko

Sixty years ago this week, the federal government passed the Current Tax Payment Act (search), arguably the most nefarious, misleading and ultimately destructive piece of legislation passed in the United States within the last century.

If you care at all about limited government, that’s not an exaggeration. The CTPA is what you and I have come to know as federal income tax withholding (search), and it’s a big reason why so many of us today sit by idly and submit to an ever-expanding federal government leviathan.

Professor Charlotte Twight (search) has done exhaustive research on the history of federal tax withholding, and documented it in her book Dependent on D.C. and in a shorter article for the Cato Institute.

Like most massive expansions of federal power, the CTPA was passed in wartime, and under the banner of patriotism and sacrifice for our boys overseas (lessons from history we’d be well-advised to heed today). Twight details a massive public relations campaign directed by the Treasury Department (search) that employed clergy, celebrities, and even Donald Duck to pitch the benefits of this new “convenience.”

The CTPA was pushed on the public with at least the implication that it would be temporary. Taxpayers were promised a one-year “recess” from federal income taxes as a carrot for allowing withholding, though most economists at the time agreed that the alleged recess was dubious. In any event, taxpayers were told, withholding was in many ways a blessing. No more worries about saving enough money for Tax Day. Now, government would do your saving for you.

In truth, most every politician and Washington bureaucrat (search) knew at the time that the public face of the CTPA campaign was decidedly at odds with the real motivation behind its passing. Withholding would put the burden of tax collection on employers. It would make federal tax collection easier. It would make raising taxes easier. And, consequently, it would make it easier for Congress to spend.

Most deceitfully -- and brilliantly -- withholding prematurely takes money from taxpayers, allows the federal government to collect interest on it, then returns the principle to us in April, under the misnomer of a “refund.”

Surprise! No longer would Americans look forward to Tax Day with dread and gloom. No longer might we use April 15 as an opportunity to determine if services we’re getting from our government adequately reflect what it’s billing us. Once the CTPA passed in 1943, Tax Day turned into Christmas. A nationwide birthday. A card from Uncle Sam (search) with a check inside. Free money on tax day? What a country!

According to research from both the Cato Institute and the accounting firm Ernst & Young, between the time withholding was passed in 1943 and the time it was fully implemented in 1945, six million Americans were added to the tax rolls. The federal government collected $43 billion in additional revenue. Between 1940 and 1950, federal revenues as percentage of the Gross Domestic Product more than doubled, and federal revenue per capita jumped 400 percent, the biggest 10-year jump for both categories in the 20th century.

And that’s exactly what was supposed to happen. Tax collection got easier. Government got richer. And we’ve been spending ever since.

Today, with a Republican in the White House and with Republicans (search) controlling both houses of Congress, the federal government still grows unabated. Even discounting for defense and homeland security (search), federal spending as percentage of GDP is at its highest level in 25 years. And that’s not including the looming prescription drug benefit -- yet another entitlement program now priced at $400 billion, but that will inevitably swell skyward from there.

It’s a scary thought. Not only is our government getting bigger, it’s growing faster than the economy. Every year, the amount of money the federal government spends gets just a little closer to the total amount of total money spent everywhere else.

It really doesn’t matter who’s in office (contrary to what you might think, Republican presidents have generally been bigger spenders than Democrats (search)). We’ve allowed our government to install a system whereby taxes are collected on the sly, but the benefits they pay for are delivered with pomp and parade. It will always be more palatable, then, for politicians to soak oblivious taxpayers than to end benefits for constituencies who are anything but oblivious to their entitlements.

The only remedy is to change the system, to find a way of funding our government that offers more accountability, and makes it less politically poisonous for our elected officials to close the checkbook from time to time.

It’s a pipe dream, I know. Asking our elected officials to voluntarily give up power they filched from us years ago seems downright delusional. But every now and then, American politics undergoes a sea change. And every now and then, like a blind piglet, a politician gropes around and per chance latches on to the teat of principle. Despite spending at rates that exceed its Democratic predecessor, the Bush administration has at least toyed with the idea of meaningful reform of the tax code (search), though the White House has made clear that such reform would be a “second term” issue.

Perhaps if we’re so lucky, withholding, or even an end to the income tax, makes it onto the agenda.

Radley Balko is a writer living in Arlington, Va. He also maintains a Weblog at www.theagitator.com.

[Conspiracy Guy]

Thanks but I had read it. I couldn't resist telling poster to "stoip it". It happens to me all the dang time. Tax reform would be great but look at the resistance to simple things like Death Tax Abolishment. Hard cold fact; "EVERY Democrat wants their hand in you pocket and too many Republicans agree with them" Thanks again.

[Destructor]

The people don't care. All the American people care about is getting the latest release from Blockbuster, and a six pack on the weekend.

Sorry that this bad old patriot disturbed you. Go back to sleep John & Jane Q. Public!

[Enduring Freedom]

The truth is that Americans should demand "choice".

Great idea!

Let Americans choose how they pay their taxes, whether by voluntary withholding, or by other direct payment.

Anything that shines the light on taxation will influence it.

Voting for a Socialist scumbag means you get to write a bigger cheque to Tom, Ted and Hillary.

The support for extraneous social programs will soon evaporate.

[Ranger Drew]

But I think that's precisely the point. With a "helpless" attitude nothing will EVER be done about it. It would be nice if people would just stand together and not cave.

[Conspiracy Guy]

No arguments there. I haven't caved and I've made it an issue both public and private my whole adult life. Show me the line and I'll stand in it to address both houses and the executive branch too. But it aint gonna happen.

[ctlpdad]

This is probably the best way to get the "soccer moms" to be decidedly conservative - a tax bill at the end of the year as opposed to withholding.
That way, people can really feel the difference between gross & take home pay.
Imagine a 35% pay raise that got yanked in 1 lump sum. That would be a hell of a pinch.

[ctlpdad]

the best way for evil to ccur is if good men do nothing.

[banjo joe]

The solution: term limits. After that the tax and witholding problems can be dealt with, if they don't implode on their own if you have a congress with no stake in vote buying.

[upchuck]

This is probably the best way to get the "soccer moms" to be decidedly conservative - a tax bill at the end of the year as opposed to withholding.
That way, people can really feel the difference between gross & take home pay.
Imagine a 35% pay raise that got yanked in 1 lump sum. That would be a hell of a pinch.

I agree. But an even better way to highlight the amount of tax we are paying would be to see the tax on every receipt for everything we buy. Click here^.

[Ranger Drew]

You said it! I love the idea of term limits.

[Psalm118]

BUT THAT'S PRECISELY the reason why witholding was started in the first place!!!

Fact is, most people pre-WWII, paid once a year. The process was made how shall I put it...painless?...hmm okay...painless...

The fact that it then became near-invisible, like novocaine-cum-vaseline is a mere odd consequence.

[ctlpdad]

Agreed.
Screw the anesthetic. <>It should hurt<>. That's what it will take for us to get back america from the tax&spend liberals (not just democrats, either)

[ppaul]

"like novocaine-cum-vaseline..."

You're on the wrong thread.

Same Sex Marriage Issue Fuels Debate

[orchid]

I remember a story from twenty or thirty years ago about an owner of a relatively small business (a dozen or so employees) who decided to show his employees exactly how much the government was taking from their paychecks in taxes. For three weeks he would pay each worker, in cash, the full amount of their pay with no deductions. On the fourh week he would again pay them in cash. But this time he would also give them a statement for what they owed for withholding taxes and Social Security. Most of the employees had little left of their pay for the fourth week. Some even owed money. When the IRS got wind of this, they put a stop to it, but FAST. The IRS didn't want people to know how big a bite they were taking out of the earnings of each and every one of them. Although the employer filed the necessary forms and made the payments to the IRS monthly, he was ordered to make the proscribed deductions weekly under penalty of prosecution (or is it PERsecution?).

If memory serves me right, this was a Paul Harvey news item.

[kevkrom]

Related thread: How Did Taxes Get So Bad?