Expanding on Peggy Noon's great column...

 ...in WSJ  Sunday 15 July 2012

Chicago PM Sunday 15 July 2012              

Editors, The Wall Street Journal

Gentlepeople:

The Wall Street Journal's Peggy Noonan writes  [Sunday 15 July] of our national need “... to get a hold of spending...” and “get a hold of the tax system and remake it so that... we can encourage growth.”

Just how out of sorts is our current tax system?  Ninety % of voters are wage earners and do not pay income taxes, which are withheld by employers and  paid with checks from employers' bank accounts, not voters' bank accounts.  This started w/ social security withholding in 1937, greatly expanded with the Current Tax Payment act of 1943 (income tax w/holding).   According to the 2012 Statistical Abstract, 73% of ALL taxes received by the federal Government come from employers' bank accounts.

Compounding the problem, the employee gets regular written statements from the employer:  "We are forced to send this money to the government under threat of imprisonment, but if we weren't, we would give it to you."  How many times have you heard  the statement:  "I Paid in!  I deserve SocSec, and Medicare!?"

Further problem:  Since this is a cost of doing business, employers add it to the cost of their product, thus converting alleged taxes on wage earners to a silent, painless, national sales tax.

How to get hold of this problem? Get a majority of the House of reps, 60 Senators, and a President with backbone enough to change the US Tax code from "every employer making payment of wages shall deduct and withhold upon such wages a tax..." to "every employer making payment of wages shall pay all of those wages to the employee...." The employer would still calculate the tax, including a note to the employee: "Here is what the feds are expecting you personally to remit in 30 days"

Returning to 90% of voters the responsibility of writing monthly checks to fund the government would force them to face how much all these entitlements cost, encouraging voting for legislators less likely to support federal vote-buying giveaways.

There is also much bleating about “the rich” not paying enough.  If you keep raising taxes on the rich long enough, inevitably everyone is left with the same amount of money (see Soviet Russia, North Korea.)  Solution?  Replace the present unimaginable morass of tax rates with a single rate:  Every citizen pays 20% of all their income to the federal government.  If you make $1 million/year, you send $200K to the feds – if you make $10K/year, you pay $2K to the feds.  Wait a minute – it's hard enough to live on $10K/year, how could you live on $8K?  Solution:  replace that mountain of 'deductions' by making the first $20K of annual income tax-free.

This would slow the growth of the federal payroll, and the annual number of graduating CPAs, but it sure would stimulate growth!

Arnold H Nelson  ah_nelson@yahoo.com