Taxes

Tax Withholding Allows Politicians' Theft to Go Unnoticed

Money confiscated before people even receive it allows for all sorts of political malfeasance.

Louis DeBroux · Jun. 26, 2019

If the income tax is not the most insidious mechanism for enslaving a free people, it must certainly be a close second.

America’s Founding Fathers explicitly and adamantly rejected a direct tax on its citizens, choosing instead to fund the legitimate operations of government through “duties, imposts (tariffs), and excises,” assessed uniformly throughout the states. That was why a constitutional amendment was required to tax the very act of working.

On the other hand, the Father of Communism, Karl Marx, listed “a heavy progressive or graduated income tax” as the second of 10 planks in his Communist Manifesto.

The income tax was first implemented in America during the War Between the States, with a maximum confiscatory tax rate of 10%. It was repealed just a few years after the war ended, in 1872.

Another income tax was passed in 1894, but was struck down by the Supreme Court. Then, in 1913, with class-warfare-based promises to the American people that only the very wealthy would be punished, Congress passed the 16th Amendment, giving constitutional authority to enact an income tax.

At its inception, the top tax rate was a mere 7%, and only on incomes over $4,000 (or $103,500 in 2019 inflation adjusted dollars). During the tax debate, William Shelton of Georgia expressed his support for the income tax as a way to hammer the rich, declaring, “None of us here have $4,000 incomes, and somebody else will have to pay the tax.”

As is often the case with actions rooted in envy, it backfired. The “somebody else” turned out to be us.

The income tax rates rose stratospherically. Under President Herbert Hoover, the tax rate was raised from 24% to 63%, and then Franklin Roosevelt, not to be outdone, raised rates to 79% and then 90%. He then issued an executive order setting a draconian tax rate of 100% for all income above $100,000, which was later repealed by Congress.

Over time, Americans were lulled into a casual acceptance of such tyrannical theft by politicians who used the revenue to enact vote-buying schemes. After all, having a mere 35% of your earnings taken by force seems downright generous when the alternative is 79%, or 90%, or 100%.

FDR also used the machinery of the Bureau of Internal Revenue as a weapon against his political enemies, a despicable habit perpetuated by Presidents Richard Nixon and Barack Obama.

Like the proverbial frog in boiling water, Americans came to tolerate, accept, or even demand (for others, at least) tax rates orders of magnitude higher than the original promised maximum tax rate. And one way of keeping Americans lulled in complacency was the implementation of withholding taxes from paychecks.

During WWII, seeking a way to fund the war effort without having to wait for revenue at the end of each year, Congress passed tax withholding, in which taxes were taken from each paycheck based on each citizen’s estimated tax liability over the course of the year.

Surprisingly, Nobel Prize-winning libertarian economist Milton Friedman, then a young Treasury Department employee working in a small technical group, first proposed withholding. Friedman later declared it “a very interesting and very challenging intellectual task.” He explained, “I think it’s a great mistake for peacetime, but in 1941-43, all of us were concentrating on the war. … I really wish we hadn’t found it necessary and I wish there were some way of abolishing withholding now.”

Withholding has been as much a boon for greedy politicians as it has been an intellectual sedative for the American people.

It allows government to take ever more of our earnings without raising our suspicion or ire, for how can we miss what we never see? If the American people had to write a check each month for their portion of the nation’s debt and governmental operating expenses, there would be outrage at the reckless nature of federal spending, which has placed us $22 trillion in debt.

Yet countless millions of Americans now get excited at their annual tax refund, treating it as a bonus rather than what it is; government paying back a mandatory interest-free loan.

Democrats’ lies have been so successful that, following the 2017 Tax Cut and Jobs Act passed by the Republicans, which slashed personal and corporate income taxes and kick-started the economy, deceitful Democrats convinced Americans they’d suffered a tax increase.

How is it possible for Americans to get a double-digit tax rate cut and still think their taxes were increased?

Because with tax rates slashed, less money was taken out of each paycheck, and therefore tax refunds were smaller than the previous year. Americans kept more of their earnings but felt they were robbed.

And we can all thank withholding for that inverted view.

Now, with the 2020 presidential campaign in full swing, the clown car of Democrat candidates are all promising to repeal the Trump/GOP tax cuts, while simultaneously promising to pass budget-busting programs like “free” Medicare for All, “free” college, and “free” health care, as well as the Green New Deal, “affordable” housing, “free” child care, reparations for slavery, and a guaranteed basic income.

With the Green New Deal alone costing an estimated $93 trillion, spending-addicted Democrats absolutely must have high income-tax rates, and withholding allows them to take more and more of our earnings largely unnoticed.

That is a victory for progressive Democrats … for now. Because we all know what happened the last time the American people woke up and realized how heavily they were being taxed.

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