Saturday, September 20, 2008

Why & how to eliminate income tax withholding 528 words

Chicago Saturday evening 20 September 2008

Wall Street Journal letters


A letter in the Thursday, September 18 WSJ "'We the People' in Paying and spending taxes" makes an excellent point on how the decrease in the number of people actually paying federal income taxes has a significant downside. But that downside is even more dangerous than even the writer says.

Ninety per cent of voters are wage earners, but thanks to the Current Tax Payment Act of 1943, 90% of wage earners don't pay any income taxes. They get statements that say they did, but the actual check that goes to DC is written on an employer bank account.
Employers are certainly not happy with this situation, but don't have the votes to fix it. But they really don't need to since they can pass on this expense to consumers, effectively sucking the largest single contribution to federal income from the soft underbelly of a continuously expanding national economy. In 230 years, we have gone from rebelling against 'taxation without representation' to meekly accepting 'representation w/o taxation.'
So voters could care less about the government bailing out any number of careless lending institutions and underfunded real estate borrowers, as long as they continue get their entitlements (and how they line up for those entitlements!)

This problem could be fixed with a simple change to paragraph 3402 of United States Code Title 26 — 'Internal Revenue Code' Subtitle C 'Employment taxes' Chapter 24 'Collection Of Income Tax At Source On Wages (a) Requirement of withholding (1) In general...'

From: "Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax...."

To: "Regardless of what is provided in this section or anywhere else in US law, every employer making payment of wages shall pay all of those wages to the employee...."

The rest of the paragraph stays the same: employers calculate the tax, and inform both the wage earner and the feds.

Would this be inefficient? Sure, for an insatiable federal government, but educational for wage earner/voters, especially once they start writing checks on their own bank accounts to the feds every month for 20% of their last paycheck. This would result in direct responsibility for 80% of federal income being given back to those who are supposed to have it in the first place: US voters.

Like the 'Fair Tax', this could not be done overnite (neither could the FT, but don't tell its supporters that.)

So have a monthly drawing of a single letter from the 26: Every wage earner who's last name begins w/ that letter gets converted that month from having income taxes withheld to sending in their own check ( a real pay-as-you-go collection system.)

This would be a good application of the frog in the slowly heating water: After 26 months, every wage earner would actually be paying his/her really fair share. And they would be very unhappy with that.

The 26-month conversion period would conveniently include reelection of all 435 house members, and 1/3 of Senators. I think the results of that election would reflect the wage earners' unhappiness with finally feeling what it's like to actually pay income taxes.

Arnold H Nelson 5056 North Marine Drive B-8 Chicago IL 60640

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