Diary

"So why do we keep giving them our money?"

A thought provoking question isn’t it?

Dennis Sevakis asks it in his piece 74% Trust Their Own Economic Judgment More Than Congress’ over at the  the American Thinker. More on this in a minute.

Well the answer to that question is  We don’t! The government takes its’ cut of our earnings before we even see it or get to deposit it in our bank account!

The impact this has on the relationship between all the citizens (taxpayers) and their  representatives in government (alleged) is profoundly disadvantageous for the taxpayers. Curious and ignorant of how this came to be the status quo, a little bing brought me to this exhaustively researched and documented study at Cato.org. It is the sordid tale of the political class’ purposeful and mendacious efforts to ” sell it (withholding) to a public previously hostile to such measures” and how it has entrenched and put our government nearly beyond the reach of the citizen taxpayer.  

EVOLUTION OF FEDERAL INCOME TAX WITHHOLDING: THE MACHINERY OF INSTITUTIONAL CHANGE

by Charlotte Twight

Taxes are the backbone of any politico-economic regime. Constraints on a government’s power to tax are constraints on its power to act. Focusing on the legalization of mandatory federal income tax withholding through the Current Tax Payment Act of 1943, this article examines forces that have eroded constraints on the U.S. government’s power to tax.

The central questions this article seeks to answer are how, why, and to what effect–despite preponderant public opposition to universal income tax withholding between 1914 and 1942–mandatory withholding was established in 1943, and sustained thereafter. It is an important question, for withholding is the paramount administrative mechanism enabling the federal government to collect, without significant protest, sufficient private resources to fund a vastly expanded welfare state. U.S. government officials themselves now view withholding as “the cornerstone of the administration of our individual income tax” (U.S. House Ways & Means Comm. Hearings 1982: 162, 165).

Congress and the president learned, to their pleasure, what automobile salesmen had learned long before: that installment buyers could be induced to pay more because they looked not at the total debt but only at the monthly payments. And in this case there was, for government, the added psychological advantage that people were paying their taxes with not much resistance because they were paying with money they had never even seen.

If we are to ever rein in our unresponsive leviathan government, then taxpayers must regain control of our earnings. This is the conclusion that Twight’s research leads us to.

After 50 years of comprehensive withholding at the source of American workers’ salaries, people are used to wage withholding; most no longer question it. The relevant institutional machinery is entrenched, both through its administrative apparatus and through its acceptance in the minds of most taxpayers. Some resistance does remain. Representative Bill Gradison (R., Ohio), for instance, stated (U.S. House Hearings 1980: 46) that “one of the greatest steps we can take toward holding down expenditures and making people aware of the cost to Government would be to reexamine our assumption that wages must be withheld upon.” More recently (Wall Street Journal 1994), in conjunction with his proposal to replace the existing income tax with a flat tax, Representative Dick Armey (R., Texas) recommended elimination of withholding, calling it a “crucial, deceptive device” that has allowed government “to raise taxes to their current level without igniting a rebellion.” But such voices are few. As ideologies accommodate altered institutional reality, as citizens’ views about what ought to be come more nearly to reflect what is, government manipulation of political transaction costs provides one key part of the explanation of how such politico-economic change has occurred.

“Such voices are few” because everyone in goverment has a vested interest in maintaining the status quo. Everyone. 

Like many of you, I’ve wondered how we might ever take back the reins of government without resorting to the unmentionable, which brings me back to another question that Sevakis asks in his piece;

“Has the time come for a general strike?”

I am suggesting the answer to this question is a most emphatic YES! The only way to stop runaway government is to defund it. As Twight’s research indicates, it is virtually assured that no one in government will ever advocate the abolition of withholding our taxes. It is left to us to devise a way to do so and return control of our earnings to where it belongs; the person who earned it. I am not advocating nonpayment of our taxes but how about if everyone reduced their witholdings to the minimum possible? Yes,  it would put a much greater responsibility on individuals to self withhold during the year, but it would deprive the government of a great deal of money (cashflow) and send an unmistakable message to those who so covet our earnings that those of us who are funding them do not approve of how they are spending our hard earned and rapidly devaluing dollars.

What say you?