Thursday, August 29, 2002 By Radley
Balko
About a month ago, I wrote a column criticizing politicians for
giving the government more power over the accounting practices
of private industry.
That's
because when it comes to "cooking the books," as they say, our
elected leaders are regular Bobby Flays.
That column triggered a pretty overwhelming
response. Yes, respondents wrote, we agree. The
U.S. government -- and Congress in particular -- have
been manipulating the federal budget and growing the size of
government for years. But what can we do about it?
That's a tough question. "Write your
congressman" rings hollow. Lots of offices on Capitol Hill
still aren't receiving mail. And besides, what power might one
letter have against 40 years of expanding federal hegemony?
But over the last month, I've been reading
an unsettling, but important book, Dependent on D.C.: The Rise of Federal Control
Over the Lives of Ordinary Americans, by
Charlotte Twight, an economics professor at Boise State
University. Twight documents in grand detail how over the past
several decades, politicians have used gradualism, special
interests and outright deception to create a state of
dependency between American citizens and their government. The
book will at once fascinate and infuriate you.
It was while reading Twight's book that I
stumbled onto an answer to the "what can we do?"
question. It seems to me that the most productive and
immediate step we can take toward holding government
accountable is to end the federal government’s ability to
withhold income taxes from our paychecks.
Think about what withholding does for a
moment.
Instead of writing a fat check to the
federal government every spring -- a check that would
naturally cause you to pause and think about whether you were
getting a proper return on your investment -- you're given a
"refund" on money the government's already
taken from you. For a sizeable lot of Americans, late April
and early May bring not headaches and paperwork, but fanciful
thoughts of vacations, a new TV or, at least, a night out for
dinner.
That's a pretty nifty trick the
government's pulled. Because that "refund" you get really
isn't a refund at all. It was your money all along. The
government took more money from you then was needed, used the
excess to collect interest, and then returned it to you,
almost certainly at a value less than when you earned it. And
yet you're elated when you get it!
Withholding tips the scales against the
taxpayers, and in favor of government.
It takes government out of the nasty
business of collecting income taxes and imposes that burden on
private employers. Why should American businesses be forced to
do the accounting and paperwork necessary to keep the U.S.
government operating?
Withholding not only makes it easier for
the government to collect taxes, it makes it easier for
politicians to raise them. That's because you never see the
money that's withheld from your paycheck. You never need to
notice that gaping wound in your bank account once your tax
check has cleared. What's more, tax increases are spread out
over 24 paychecks, which softens the blow to taxpayers, making
tax hikes more politically palatable.
In her book, Twight delves deep into
congressional testimony, newspaper articles and federal
records to document how our current withholding system was
passed into law, known as the 1943 Current Tax Payment Act.
Proponents of the act showed no bounds in
soliciting public support for withholding.
Politicians and U.S. Treasury officials
tapped into American patriotism, imploring taxpayers that a
bit of sacrifice at home paled in comparison to the sacrifice
"our boys" were showing on the battlefields of Europe and the
Pacific.
Americans were further assuaged with an
alleged one-year "tax forgiveness plan" as the new system was
phased in to replace the old one. That plan proved to be
statistically dubious. Twight even documents federal Treasury
officials referring to it as "a paper forgiveness." The
columnist Amity Shlaes, writing for The Wall Street
Journal, called it "the most ambitious bait-and-switch
plan in America's history."
Withholding proponents also neglected to
tell Americans that they would actually be losing money
through the withholding plan. That's because the same amount
of money taken from a paycheck in January is worth far less
than it will be when tax season rolls around 15 months
later. The value of money increases over time. In effect, the
withholding act was a tax increase, sold to the American
public as a tool of convenience.
The federal withholding power was passed
with much public manipulation and chicanery, and at a time
when America was at war -- and consequently most beholden to
and trustful of its elected officials and its government.
Today, the federal government grows wildly
out of control. Congress spends well beyond its means, then merely "readjusts" figures -- i.e. borrows
from Social Security or shifts figures from one fiscal year to
the next -- to compensate. But because Americans are taxed
before they ever see the full amount of what they've earned,
we remain largely ambivalent about -- or even amused by
-- the antics of our elected leaders.
What better way to bring government back
into account then to require each taxpaying American to sit
down on April 15 and write one massive check to cover his tax
burden? Each of us then would have no choice but to evaluate
our government's performance, to gauge whether what we're
getting is worth what we're paying.
It wouldn't be all that difficult
politically. A repeal of the 1943 law would take only a
majority of both houses of Congress, and a signature from
President Bush. Granted, there would be a bureaucratic logjam
as the U.S. Treasury and the IRS struggle to convert from a
withholding system to a pay-once-a-year system. Collection
would be much more difficult. You'd probably get more tax
evaders. More bounced checks. Lots of people would fail to
properly save for tax season.
But collecting taxes should be
difficult. And it should be done by the government that spends
them, not by private employers. When tax collection is easy,
spending tax dollars becomes easier, too. And government
grows.
A few prominent politicians have already showed
some interest in the injustice of withholding. Others could be persuaded. If we're serious
about holding our federal government accountable, about
limiting its growth, about streamlining its excesses, I can't
think of a more significant or productive first step than to
end federal income tax withholding.
Radley Balko is a writer living in
Arlington, Va. He also maintains a weblog at http://www.theagitator.com/.
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