Well, it’s after April 15th. I sure hope you have your tax forms filled out and in the mail by now. The government really doesn’t like slow-pokes when it comes to paying taxes. If you want to really grasp the concept of “eternal torment,” just skip paying your taxes one year. The government will be more than happy to explain in great detail just how tormented your life will become.
What would you do if you could make three wishes and change the way taxes are handled in the U.S.? What would you change if wishing would make it so? Let me give you my three wishes:
I. No tax withholdings
I wish that Americans didn’t have their taxes withheld from their paychecks. I would much rather make the full tax bill due and payable on April 15th. Withholding taxes from paychecks was one of the sneakiest changes made to the federal income tax. The change came in 1943 to help finance World War II. This temporary (yeah, right) change to the tax laws required employers to withhold federal taxes with each paycheck. The cash-strapped government couldn’t wait until April 15th for the revenue to come in, so it started collecting taxes all year long. This change allows the government to collect interest on tax money, basically putting your money to work for them before they would normally receive it.
The result of this tax withholding is a numbing of the pain of paying taxes. Since the tax comes out of our paychecks each payday, we don’t really miss the money. Granted, there is that first-time pain of looking at your paycheck and seeing just how much the government has taken, but you get used to it. Humans are remarkably resilient this way. I can’t tell you how many times I’ve heard people cheering about their tax refund. “Look at all the money the government is paying me!” But it’s not the government’s money; it’s your money. You granted the government the right to gain interest from your money, and in exchange you receive nothing other than the mistaken feeling that you have somehow made money.
This change would require that people set aside their own money each paycheck to pay for their income tax, but homeowners are used to paying for their property taxes in one lump sum. Some municipalities will break the property tax bill into 12 monthly payments to make it easier for homeowners to avoid a single large payment when the bill comes due. Removing withholdings would require people to exercise the fiscal self-control not to spend all their money without saving up their tax payments. It would also make people aware of just how much they pay each year in taxes.
II. A government that spends only what it is lawfully allowed to spend
My second wish would be for a Federal Government that would only spend money on things it is permitted by the Constitution to spend. Article 1, Section 8 of the Constitution outlines the only things that Congress is permitted to do. Sadly, it is the normal state of things for government bureaucracy to grow. Ours has had two centuries to grow far past its normal and Constitutionally permitted bounds.
If the government were only to spend money on those things that were mandated in the Constitution, it wouldn’t need a budget in the trillions. Thomas Jefferson was correct when he said, “That government is best which governs least.” Ours has been doing more and more for the citizens of this country, since we as citizens have been asking, even begging, the government to do more and more to take care of us. The problem is that the government which can do much for you, can also do much to you.
III. A simple flat tax
My final wish would be for a simple flat tax. This would apply to everyone, and there would be no tax loopholes, penalties or deductions. Since my second wish would reduce the overall cost of government, the resulting tax burden to the people would be dramatically less. I would guess that such a flat tax need not be more than 10% of a person’s income.
When I described these wishes to my wife, she asked at what point the flat tax would kick in. I explained that the tax would be 10% of all income. In other words, a CEO who makes $60 million would pay 10%, just the same percentage as a minimum-wage burger flipper would pay. When I have proposed this before to people, they point out that 10% of $1 million doesn’t hurt as much as 10% of $100 because the millionaire with $900,000 left over certainly has more buying power than the kid with only $90 left. I agree that this is true, but I still would not exempt the people at the bottom end of the wage scale. People who pay taxes are participants in their country’s government. Currently the bottom 50% of wage earners in the U.S. pay less than 4% of the overall income taxes. That means that half the country doesn’t care about tax rates because they don’t pay a significant amount of the taxes that run the government. Is it a coincidence that we never reach a voter turnout of 50% or more during an election? Could it be that those who stay home feel they have no part in choosing the people in government since they do not contribute with taxes? If everyone paid the same rate, it would make it much harder for Congress to pass a law increasing that rate. Democrats get away with demagoguing the issue of tax cuts/hikes by claiming that they are only for “the rich.” But with a flat rate, you could not gore the rich without having the ox also goring you.
“But charging rich people the same as the poor isn’t fair!” Really? How do you define fair? Is it fair that half of the U.S. sits on its hands while the other half does the heavy lifting? I cannot see that as fair. But if everyone is taxed at the same 10%, then everyone pays at the same rate. That is fairness. It would also mean that computing your taxes would be much easier than it currently is. All you’d have to do is take 10% of your income and write the check. You’re looking at a task that would take a few minutes of time, rather than an average of 28 hours as estimated by TaxFoundation.org. I don’t know about you, but I have things I’d much rather do with my time.
Speaking of which, I think I’ll go off and do some of them.