Tax Day Reminder

Some taxpayers are aware that any refund on their return is their own money. On the other hand, many may be unware that the government got their money before they did. This takes place through the practice of withholding money from workers’ paychecks, a development dating to World War II.

“Wars have always been the most important occasions for the introduction of new forms of taxation,” writes Robert Higgs (Crisis and Leviathan). “One way to capture more revenue is to reduce tax evasion by seizing the people’s earnings before the earners ever lay hands on them. This procedure has come to be known as tax withholding at the source, or simply withholding.”

The Current Tax Payment Act was signed into law on June 9, 1943, and the next year, employers withheld almost $8 billion for income taxes, followed by $10 billion in 1945. That was the last year of the war but withholding carried on, with disastrous results.

“We gave next to no consideration to any longer-run consequences,” explained Milton Friedman, who worked as an economist at the Treasury Department during World War II and helped to develop tax withholding. “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. Yet, that was precisely what I was doing.” The fix is not a complicated matter.

Instead of only their “take-home pay,” workers should get all the money they earn. They can pay their taxes in quarterly installments in the manner of freelancers and, as Higgs notes, all taxpayers before WWII. It’s hard to find any politician who advocates these simple policies, which would trim the power of the IRS, now being literally “weaponized” against political opponents. The struggle against the pillage people is the struggle of memory against forgetting.

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