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Anti Federalist
04-11-2013, 02:45 PM
The history and reasoning behind this are rarely discussed and talked about.

But not only did this "temporary" measure turn us all into serfs of the FedCoats, it also completely dog fucked any sort of free market incentives for things such as health insurance and retirement planning.

Individuals used to be responsible for this, until income withholding made companies, desperate to attract skilled new workers, but hard pressed to just put money on the table, as it would get confiscated by the progressive nature of income taxation AND withholding, started offering paid health plans, vacations, pensions, cars and other perqs that fell outside the FedCoats' grasp.

And now, here we are.


The Curse of the Withholding Tax

By Laurence M. Vance

http://mises.org/daily/1797

Did you have to write out a check to the IRS for $5,581 this past April 15? If you had to do such a thing next year, would you think of it as your civic duty or would you consider it a crime that only the government could get away with?

A Typical Taxpayer

This figure of $5,581 is not an arbitrary one. According to the U.S. Census Bureau, real median household income was $43,318 for 2002 and 2003. A taxpayer with an income of that amount who was single with no children would, after his standard deduction of $4,850 and his personal exemption of $3,100, owe $5,581 in federal income tax for tax year 2004. If this same taxpayer was married and his spouse did not work, he would be entitled to an extra personal exemption, thus lowering his tax liability to $3,399—still a huge sum for most Americans to come up with.

If this same couple were to have a child, they would gain not only another personal exemption, but also a $1,000 child tax credit. However, their tax liability would still be $1,934—an amount that the typical American does not have in his checking account. The addition of another child would lower this couple's tax liability down to $469.

The Withholding Tax

But regardless of the amount of federal income tax that one ultimately pays, the fact that the U.S. government seizes the wealth of its citizens slowly over the course of the year via the withholding tax means that the typical taxpayer is comfortable in each of the above scenarios because he doesn't actually have to write out a check to the government on April 15 of each year.

The withholding tax makes it possible for the government to silently steal the wealth from its citizens with little or no outrage about the loss. And even in the case where the citizen receives a refund of all the taxes he has paid in, the withholding tax still serves two evil purposes. First, getting a refund of all the taxes one pays in amounts to an interest-free loan to the government. The government gets money to continue its spending orgy, and the citizen loses the ability to receive a return on money that could be invested. And second, getting a tax refund fosters the notion that the government is benevolent. Never mind that the money is yours. If the government sends you a check in the mail then the government can't be all that bad.

If the $5,581 were gradually taken out of one's paycheck over the course of the year and no money was owed on April 15, the pain of the theft would be greatly diminished, but for two entirely different reasons. Obviously, it is less painful to have $107.33 taken out of one's check every week for fifty-two weeks than writing a check to the government for that amount every week or a check for the whole amount once a year. The second reason the pain of the $5,581 loss would not readily be felt is that very few people pay any attention to the amount of taxes that are withheld from their pay. They are concerned only with their take-home pay. This is unfortunate because if the people who pay taxes actually realized how much the government was taking from them they would be outraged.

The Origin of Tax Withholding

So where did the withholding tax come from? It was not part of the original income tax that resulted from the sixteenth amendment in 1913. Very few people paid any taxes back then anyway. The income tax did not directly affect the average American until World War II.

On the eve of the war, few Americans paid income taxes. Those that owed taxes paid them in one lump sum on March 15 (later changed to April 15). To pay for the war, the Revenue Act of 1942 lowered exemptions and raised income tax rates. But it also did something even more insidious—it instituted a 5 percent "Victory Tax" on all wages above an exemption of $624. The tax was to be collected by the employer and deducted from the employee's paycheck—just like the Social Security tax that began in 1935.

The Current Tax Payment Act of 1943 then revolutionized the income tax by making withholding taxes universal. The withholding tax was part of the new tax plan offered by Beardsley Ruml (1894–1960), the chairman of the New York Federal Reserve Bank and treasurer of R.H. Macy and Co. By 1945, about three-fourths of Americans were paying federal income taxes. And although the withholding tax was sold as a wartime emergency, like most expansions of government instituted during wartime, it has been a way of life for most Americans ever since.

The Curse of the Withholding Tax

The income tax allows the government to confiscate the wealth of its citizens. The curse of the withholding tax is that it allows the government to commit this crime systematically, effortlessly, painlessly, and benevolently.

Surprisingly, it was a free market economist who helped the federal government implement the withholding tax in the first place. As was pointed out by the Austrian economist, Murray Rothbard (1926–1995), in his 1971 article "Milton Friedman unraveled":

One of Friedman's most disastrous deeds was the important role he proudly played, during World War II in the Treasury Department, in foisting upon the suffering American public the system of the withholding tax. Before World War II, when income tax rates were far lower than now, there was no withholding system; everyone paid his annual bill in one lump sum, on March 15. It is obvious that under this system, the Internal Revenue Service could never hope to extract the entire annual sum, at current confiscatory rates, from the mass of the working population. The whole ghastly system would have happily broken down long before this. Only the Friedmanite withholding tax has permitted the government to use every employer as an unpaid tax collector, extracting the tax quietly and silently from each paycheck. In many ways, we have Milton Friedman to thank for the present monster Leviathan State in America.

Conclusion

For Good and Evil (Expanded 2nd edition)

The definitive anti-tax history by Charles Adams ($30), and see also his 10-hour audio course on tax history.

Ideally, the elimination of the withholding tax would force the American people to see exactly how much of their income is being confiscated by the government to fund its trillion-dollar budgets. This would, of course, have to be followed by sufficient outrage on behalf of the American people to reduce those budgets. The elimination of the withholding tax is also sometimes seen as freeing businesses from being tax collectors. But this would only be true if businesses also ceased to collect Social Security tax for the government.

But on a more practical note, there are two reasons why even if the withholding tax were eliminated it might not result in sufficient enough outrage at the level of government wealth confiscation and spending. First, the majority of the population presently pays little or no income tax. It is of no consequence to them if the "rich" have money withheld from their paychecks or not. And second, many out of this majority are not only not taxpayers, they are taxeaters who benefit from the redistribution of the wealth of those who actually pay taxes. The continued expansion by the Republicans in Congress of refundable tax credits like the Earned Income Tax Credit and the Additional Child Tax Credit will ensure that the number of taxeaters will increase.

There is also one significant practical consideration that cannot be ignored. The chance that Congress would ever eliminate that which provides the government with a continual flow of revenue is zero. There is, therefore, nothing short of dramatically rolling back income tax rates (good) or eliminating the income tax altogether (better) that will even begin to tame the federal leviathan.

ZENemy
04-11-2013, 02:50 PM
This information is like a loaded gun, sitting on the table it does nothing, one must pick it up, Aim and pull the trigger.

We have ALL the information we need on how corrupt those that control us is, time to aim the god damn information at a target and take it out.

Anti Federalist
04-11-2013, 02:52 PM
This information is like a loaded gun, sitting on the table it does nothing, one must pick it up, Aim and pull the trigger.

We have ALL the information we need on how corrupt those that control us is, time to aim the god damn information at a target and take it out.

I'm hip.

I've been hollering about this for years now.

A dull, glazed look or "Why would I want to get rid of that, the government gives me a refund every year?" is the usual response.

phill4paul
04-11-2013, 02:58 PM
When a penny is filched from a coin laden pocket the loss is not felt and therefore there is no hue and cry of "Thief! Thief!" Only when enough coins are filtced such that it there is a noticeable loss will a call thus issue. The good pickpocket, the great ones, know how to replace the coins with something of equal weight but far less worth.

Pericles
04-11-2013, 03:02 PM
When a penny is filched from a coin laden pocket the loss is not felt and therefore there is no hue and cry of "Thief! Thief!" Only when enough coins are filtced such that it there is a noticeable loss will a call thus issue. The good pickpocket, the great ones, know how to replace the coins with something of equal weight but far less worth.

One of the things I like about Switzerland. You get a bill for your taxes and you have to pay it. That keeps everybody more properly focused.

phill4paul
04-11-2013, 08:12 PM
//

roho76
04-11-2013, 08:29 PM
I would love to hear the negotiations from their side if everyone were to stop paying taxes. We'd probably all get a tickle.

torchbearer
04-11-2013, 08:32 PM
I just got on my boss today for with holdings on my paycheck. i asked him if it bothered him that the government made him the tax collector? i asked him why he didn't object to this- his answer, they would arrest me. then i went on a 20 minute philosophical tirade about property rights, the problems with the republican party, and plans i had to change it. i was surprised i wasn't fired by the end of it.

phill4paul
04-11-2013, 08:35 PM
I just got on my boss today for with holdings on my paycheck. i asked him if it bothered him that the government made him the tax collector? i asked him why he didn't object to this- his answer, they would arrest me. then i went on a 20 minute philosophical tirade about property rights, the problems with the republican party, and plans i had to change it. i was surprised i wasn't fired by the end of it.

The answer is not that he would be arrested. It is that he would not be in business.

Though he may not be in prison he could not make a living. Kind of a prison outside a prison,

torchbearer
04-11-2013, 08:38 PM
The answer is not that he would be arrested. It is that he would not be in business.

Though he may not be in prison he could not make a living. Kind of a prison outside a prison, well, i wish i had a recording of the conversation. but i, in essence offer him a deal- he retorted once, 'i(my boss) pay half of your witholdings'. in which i replied, "how about- you keep your half of that money, and i keep my half'. his response was not immediate- but that even though he objects to the witholding tax, he wouldn't do anything about it because he'd be arrested.

phill4paul
04-11-2013, 08:44 PM
well, i wish i had a recording of the conversation. but i, in essence offer him a deal- he retorted once, 'i(my boss) pay half of your witholdings'. in which i replied, "how about- you keep your half of that money, and i keep my half'. his response was not immediate- but that even though he objects to the witholding tax, he wouldn't do anything about it because he'd be arrested.

Sure he agrees one hundred percent. How could any business owner not? He could pay you more and keep more himself. I guess it depends. I've yet to see a small business owner not understand the score but I have yet to see a small business lobbying association fight this particular measure.

mad cow
04-11-2013, 09:01 PM
Farmers and fishermen are exempt from making quarterly estimated tax payments.As a fisherman,I had to pay 100% of what I owed or 100% of what I paid the previous year and the rest by April 15th,by January 15th every year in one big-assed check.Also 'both halves' of FICA

I always thought that there would be a lot more people marching on Washington with pitchforks and torches and/or in federal prison for non-payment if everybody had to do this.

phill4paul
04-11-2013, 09:05 PM
Farmers and fishermen are exempt from making quarterly estimated tax payments.As a fisherman,I had to pay 100% of what I owed or 100% of what I paid the previous year and the rest by April 15th,by January 15th every year in one big-assed check.Also 'both halves' of FICA

I always thought that there would be a lot more people marching on Washington with pitchforks and torches and/or in federal prison for non-payment if everybody had to do this.

You damned right. Or more importantly they'd stay home and not send a dime.

Tinnuhana
04-11-2013, 09:27 PM
I'm about to pay close to $5000 to the Infernal Revenue Service. Three days and nights wasting spring break going to the base tax office and staying up late to call the IRS toll-free number.
I usually get $8000 or so withheld. I get around half of that back each year.
However, this summer, I emptied a tax-free account (tax free till I withdrew, anyway) and of the $140,000, the gov't took $26,000 off the top (20%).
So I figured I'd get a good part of that back. No way. Instead, I was told I owed $41,000 FOR THE YEAR and income averaging is just for farmers as of 1986.
So I'm hoping I can get through this. After they take the money, I'll have $125 left in the bank.
The people at the IRS are pretty sympathetic, saying that lots of people are losing out and getting exhorbitantly taxed on their 401Ks and the like.
I've just got to hope no bills come up. Fortunately, I have quite a store of food, so I won't have to do much grocery shopping.

jclay2
04-11-2013, 09:45 PM
I'm hip.

I've been hollering about this for years now.

A dull, glazed look or "Why would I want to get rid of that, the government gives me a refund every year?" is the usual response.

Silly af, without tax withholding how could the sheeple afford their new flat screen tvs and down payments for their 97 month used car loans?

cindy25
04-12-2013, 03:21 AM
ending this is one thing Rand could do by executive order.

A Son of Liberty
04-12-2013, 03:32 AM
I'm being bent over the barrel myself this year, and it's standing in the way of the accomplishment of some goals.

There are times I wish I was still a blind sheep. At least it's less painful that way.