Automatic tax withholding

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  • Title:

    The Tyranny of Clichés
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Article Highlights

  • Tax withholding numbs workers to the pain of their taxes.

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  • Tax withholding leaves naive taxpayers suffering from a kind of fiscal Stockholm syndrome.

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  • Tax withholding means we are, in effect, working for the government before we are working for ourselves.

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Editor's note: This article originally appeared in The Washington Post's Outlook's fifth-annual Spring Cleaning. Outlook asked 10 writers what ideas, traditions, people and places we'd be better off without.

During World War II, the U.S. government needed to raise cash — and fast. A team of experts that included an obscure young economist named Milton Friedman came up with income tax withholding. It was, as one senator put it, the best way to “get the greatest amount of money with the least amount of squawks.”

Friedman, who would go on to become the high priest of the free market and small government, eventually appreciated the irony of that statement. He didn’t regret suggesting withholding as a wartime measure, but he spent the rest of his life lamenting its longevity in peacetime. “It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom,” Friedman wrote in his 1998 memoir, “Two Lucky People.” “Yet, that was precisely what I was doing.”

Withholding numbs workers to the pain of their taxes. As the Treasury Department Web site explained as recently as 2009: Tax withholding “greatly eased the collection of the tax for both the taxpayer and the Bureau of Internal Revenue. However, it also greatly reduced the taxpayer’s awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future.” (Oddly, that fact sheet no longer appears on Treasury’s Web site).

Withholding leaves naive taxpayers suffering from a kind of fiscal Stockholm syndrome. They actually celebrate when they get a tax refund, the way a broken hostage might thank a kidnapper who returns his property to him. A refund is when the government pays you back for the interest-free loan it forced you to make in the first place. Congratulations!

Withholding is corrosive to democracy for many reasons. The unspoken assumption is that the government’s needs are more important than yours. Withholding means we are, in effect, working for the government before we are working for ourselves.

Worse, since taxpayers are anesthetized to the pain of paying taxes, we’re becoming ever more disconnected from the product we are buying. There’s a reason Tax Day and Election Day are just about as far apart as possible. Why not make everyone write a check every quarter? Better yet, make them write a check once a year — on Election Day. Not only would you get what you pay for, but comparison shopping works better when the price tag is in plain sight.

Jonah Goldberg, editor at large of the National Review Online and a fellow at the American Enterprise Institute, is the author of “The Tyranny of Cliches: How Liberals Cheat in the War of Ideas.”

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