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Seventy-one years ago, on July 1, 1943, the federal government first started withholding income tax from workers’ paychecks. For the first time, the government would get workers’ money even before the workers did. As a freerepublic blogger noted on the 60th anniversary, that’s not exactly an occasion for celebration.
“Why is withholding so bad? Because it effectively masks the amount of income taxes American workers pay. Tax withholding introduced a new phrase into the American lexicon: ‘Take home pay.’ Today the average American has no idea how much they actually make, let alone how much they pay in income taxes.” But it was wonderful for the political class. “They manage to plunder your paycheck to fund their grand vote-buying schemes, and you barely notice.”
As Jonah Goldberg observed, “the unspoken assumption is that the government’s needs are more important than yours. Withholding means we are, in effect, working for the government before we are working for ourselves. Worse, since taxpayers are anesthetized to the pain of paying taxes, we’re becoming ever more disconnected from the product we are buying.”
When this all started in 1943 it was wartime and the government needed money. A “team of experts” that included economist Milton Friedman came up with the idea of withholding money from worker’s paychecks. This was supposed to be temporary but it didn’t turn out that way. It later occurred to Friedman that he was helping to make government too big, too intrusive and too destructive of freedom. Government is still that way in 2014 on the 71th anniversary of withholding, with no meaningful reform in sight. As Friedman also lamented, nothing is more permanent than a temporary government program.