Thursday, August 13, 2009

Support democracy, end payroll tax withholding

This is one of the clearest, non baloney editorials I have read in a long time: Tax Withholding Is Bad for Democracy. Charles Murray writes in the Wall Street Journal with such a wonderful clarity and with such common sense, you have to wonder why more people don’t get this. From the editorial (emphasis added):

Yes, you read it right: 1% of American families paid 40% of America's personal taxes.

The families in the rest of the top 5% had family incomes of $160,000 to $410,000. They paid another 20% of total personal income taxes. Now we're up to three out of every five dollars in personal taxes paid by just five out of every 100 American families.

Turn to the bottom three-quarters of the families who filed income tax returns in 2007—not just low-income families, but everybody with family incomes below $66,500. That 75% of families paid just 13% of all personal income taxes. Scott Hodge of the Tax Foundation has recast these numbers in terms of a single, stunning statistic: The top 1% of American households pay more in federal taxes than the bottom 95% combined.

That kind of flies in the face of the “let the rich pay their fair share” rhetoric we get from the Left in general and from the White House in particular. Everyone knows these numbers. Everyone. Still we hear calls for the rich to “pay their fair share”. These stats are not new and they are not skewed. This is the truth of it. When the Obama administration suggests that tax increases are OK because the rich don’t pay their fair share, they are flat out lying. The top 1% of Americans get 1% of the vote but they pay more in taxes than the lower 95% combined. The result of this disparity?

This deforms the behavior of everyone—the voters who think they aren't paying for Congress's latest bright idea, the politicians who know that promising new programs will always be a winning political strategy with the majority of taxpayers who don't think they have to pay for them, and the wealthy who know that the only way to get politicians to refrain from that strategy is to buy them off.

People are always whining about the influence of money in politics. Well, duh what do you expect? The people who pay all of the money into the system are the same people who buy off politicians. Little wonder when they see the rest of their fellow Americans greedily eyeing their wallets. It is apparent that there is a school of thought that assumes that the top 5% of wage earners should pay all of the taxes in this country and the rest of us should reap the benefits. That is a democracy? We all get a vote but only a tiny fraction of us have to pay for the results of that vote?

The big problem in our democracy is that we all get an equal vote (which is good) but we don’t all have an equal stake in the game (which is bad). If you are like me and are part of the one third of Americans who pay no income tax, why do you care about what the government spends? It is not my money that they are spending. That simply is not a healthy way for democracy to function. One third of Americans get to vote themselves a share of the pockets books of the other two thirds of Americans with no corresponding monetary sacrifice.

Mr. Murray’s solution is two-fold. First, make sure that even if people pay no income tax they still see the dollar figure for Social Security and Medicare on their 1040. The second is to make everyone, everyone, pay the taxes by check. It is not a big deal to have a couple hundred bucks taken out of your check each payroll because you pay it every week and never miss it. Write a check in March for $5000 for Social Security and Medicare? That might give you pause. Imagine instead of payroll deduction that you open a savings account and from one year to the next you have to set aside money each paycheck toward your taxes and you see that balance grow and then in one fell swoop you write a check and it is gone. You wouldn’t pay one nickel more than you pay now but you would have to pay it yourself. The payroll tax is one of the most ingenious inventions of the government because it allows them to suck taxes out of you every week (and at great expense in the form of complex payroll systems) that you barely feel. It is the death of a thousand little cuts.

Mr. Murray ends his editorial with a call to return our democracy to one where we are all in this together instead of one where we are pitted against one another by our rulers to deflect attention from their malfeasance:

End the payroll tax, end withholding, and these corrosive misapprehensions go way. We will once again be a democracy in which we're all in it together, we all know that we're all paying a share, and we are all aware how much that share is.
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