Withholding Power

All this talk about whether to extend or repeal tax cuts reminds me of one of the worst aspects of the tax code. I think it’s done more to confuse the issue of who’s earning the money and who’s entitled to it than any other tax regulation. It’s also freed the hands of big spenders in government without any real accountability. I’m talking about the mandatory withholding of taxes that began in 1943.

Think about it. You earn money, but you never see it. You never touch it. You never earn interest on it. And you certainly never spend it. It goes directly to the government, and, while making the payment a little more “painless”, it feeds the notion that the money belonged to the government in the first place. Salaries become more theoretical than real, and the amount withheld becomes factored into your thinking. In other words, your take-home pay, for all practical purposes, becomes your salary.

Imagine, however, having to sit down once a week or once a month and write checks to the state and federal governments. There would be several immediate benefits. First, workers would have a greater sense of how much of their money is being spent, and they would almost certainly keep a closer eye on what their leaders were doing with these funds. Second, government would be forced overnight into having to be more accountable to taxpayers. No longer could officials hide behind withholding and pretend the money was theirs to begin with. And third, the money could be invested and spent in the private sector before having to be sent to the state capital or to Washington.

This strikes me as a winning issue for a candidate, because the only counter-arguments are that taxpayers can’t be trusted to send the money or are too irresponsible to manage their money; not exactly arguments that would be attractive to voters. But what about taxpayers who like the current system? Maybe they don’t want to bother sending checks or maybe they like the false sense of thinking they’re getting a gift when the refund check comes. Fine. Then make withholding voluntary.

Somehow, we’ve got to rid governments of the notion that money earned belongs to them. It belongs to us, and we agree to pay a certain portion of our earnings to maintain local, state and federal services. Taxes are a necessity. I don’t think most Americans begrudge the notion of taxation, but there is a growing distrust and disdain of the system. Perhaps that attitude could change if governments started trusting their citizens. Let us have our own money, and let’s agree on how much you need to operate, and we’ll send it to you. Withholding money is the way you’d deal with children. But maybe that’s the point.

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