The federal government did not have the power to levy income taxes until 1913. For a very good reason, the founding fathers understood any ability to tax, to seize the property of citizens, most certainly could and would be abused. This was not pure conjecture on the part of our founders but was the result of studying the behavior of governments throughout history.
Until the passing of the Sixteenth amendment, the federal government managed to conduct its business using the constitutional forms of revenue collection defined in the Constitution. Even in times of emergency when income type taxes were instituted, such as the civil war, they were quickly rescinded when the emergency passed. After the passage of a constitutional amendment allowing a federal income tax, payroll deductions of those taxes were quickly rejected. Citizens paid their tax bills yearly as a direct payment from the tax payer to the government. What you paid in taxes was obvious.
The huge expense of WWII offered the government the opportunity to institute a payroll deducted income tax. In a classic example of the slippery slope, government officials reasoned since we already had a payroll deducted social security tax, that to make sure the government got all the tax it needed or wanted, why not use payroll deducting for income taxes also? The 1940’s saw a huge change in the income tax where originally a minority of wealthy citizens paid income tax to a tax on the masses where virtually every citizen who earned income paid some tax. Tax filings went from less than 8 million in 1939 to 35 million in 1943. Wrapped in the patriotic obligation to “support the war” and sold as a “convenience to the tax payer”, taxes for the first time would be deducted (confiscated) before the tax payer ever saw the money. What was the government reasoning? “We are only doing this to make it easier on the taxpayer”.
But even as the government was promoting payroll deducted taxes as a service to the citizens, Congress understood the advantages of people not really seeing the money as it flowed to the government. As Representative Donald H. McLean said (U.S. House Hearings 1943: 85)payroll deductions would serve in , ``protecting the Government revenues not only now, but for all times to come.'' He felt that ``the need for the change in the collection method, due to the increase of the number and type of taxpayers that we have brought into the system.'' that it would be ``good business'' for the government: government ``will have more revenue; ... its people will pay better and be happier about it.'' Representative Frank Carlson (R., Kans.), warned witnesses to use such language, reminding them that the House Ways and Means Committee ``passed a 10-percent increase in our income and corporate taxes a year ago by calling it a defense tax.'' He added that ``the suggestion that we call this tax a war tax is a good one.'' Representative A. Willis Robertson (D., Va.) noted “the word forced is not a euphonious name'', it ``would be much better if we should call it `Victory savings,' or something of that kind'' (U.S. House Hearings 1942, vol. 1: 108). Treasury official Randolph Paul at the same hearing agreed.
And even though support for the war was massive, popular support for payroll deduction for income tax was barely 50%. That was until the government came up with a better sales pitch. There was a real problem in the year the country would switch collection systems. If a “pay as you go” system was adopted in 1943 the tax payer would be responsible for their 1943 taxes being payroll deducted, and their 1942 taxes that they had accrued, basically double taxes in that year. The government’s solution was as sellable as it was deceitful. The Congress eventually passed and the President signed a bill that allowed for the “cancellation of 75% of the 1942 tax liability. When people where presented with the idea that they would escape their 1942 taxes, support soared, even though most government officials realized it was as Former Treasury Department official Elisha Friedman openly called it a ``paper forgiveness”. As Mr. Friedman noted in congressional hearings in 1942, “The `forgiveness' of the small brackets is merely temporary. ... They will pay more later. ... You will forgive the 1942 tax for the little people but in 1944 and 1945 they will be paying at a higher rate. ... Ours is a paper forgiveness for the low brackets.” In other words the revenue lost by not collecting the 1942 tax would easily be made up because the payroll deduction would make tax increases seem painless to the tax payer.
In what has become common practice, we see Congress doing what is good for the government, in deference to what is good for the citizen, and cloaked in the illusion that it is good for the country as a whole. But it is hard to see how anything that injures the citizen can in the long run be a good thing.
And as they say, “the rest is history”. With a payroll deducted income tax in place, separating the tax payers, from their property became easy, people don’t miss what they never had and not many take the time to actually look at their pay checks and realize the volume of money being handed off to the government. As Senator John A. Danaher observed (U.S. Cong. Rec.-Senate 12 May 1943: 4268, 4272, 4282) ``the fact of the matter is the Treasury collections will go up annually rather than down.'' And as Senator Byrd in 1943 predicted ``before the ink is dry on the signatures, we will call upon the Congress to increase the existing tax rates in proportion to the cancelation [sic] and forgiveness we extend to the taxpayers.'' He believed that ``so-called benefits to the taxpayer'' would then ``quickly sink into complete oblivion'' so that ``most taxpayers would be injured rather than benefited''
Fast forward to 2011 and the federal government officially hit the 14 trillion dollar debt limit this week. In 2010 social security recites were 49 billion dollars short of payments, and the country is racking up one trillion dollars of debt per year. The total 2011 federal spending is at 3.7 trillion dollars, or almost 7 billion dollars a minute! The federal government uses payroll deducted taxes to siphon off ever increasing amounts of money to fund every function Congress can dream up with almost no regard to constitutional limits of that spending. Now conservatives like Paul Ryan are pushing back against out of control spending and focusing on how much money the government actually goes through.
The response given to the Los Angeles Times last Thursday from Mr. Reid, democratic leader of the Senate is ““It would be foolish for us to do a budget at this stage.”
Foolish Mr. Reid?
Foolish would be a government that borrows 40% of the money it spends.
Foolish would be a government that buries its head in the sand as Medicare and Social Security careened toward certain bankruptcy that will certainly destroy the economy.
Foolish would be trying to convince the American people if we just increase taxes on just 5% of the population that it will fix everything.
Foolish would even be an American population allowing our elected leaders to get away with such foolishness.
But most foolish of all would be not doing your job and create a budget that deals with the financial disaster that you and your elected colleges have created - unless of course we are only taking about politics and not actually about governing.
The federal government pulled the wool over our eyes in 1943 as Americans tried to save the free world from Fascism. It’s now time we take off the blind fold, really look at what is happening in Washington and fix the problem.
Until the passing of the Sixteenth amendment, the federal government managed to conduct its business using the constitutional forms of revenue collection defined in the Constitution. Even in times of emergency when income type taxes were instituted, such as the civil war, they were quickly rescinded when the emergency passed. After the passage of a constitutional amendment allowing a federal income tax, payroll deductions of those taxes were quickly rejected. Citizens paid their tax bills yearly as a direct payment from the tax payer to the government. What you paid in taxes was obvious.
The huge expense of WWII offered the government the opportunity to institute a payroll deducted income tax. In a classic example of the slippery slope, government officials reasoned since we already had a payroll deducted social security tax, that to make sure the government got all the tax it needed or wanted, why not use payroll deducting for income taxes also? The 1940’s saw a huge change in the income tax where originally a minority of wealthy citizens paid income tax to a tax on the masses where virtually every citizen who earned income paid some tax. Tax filings went from less than 8 million in 1939 to 35 million in 1943. Wrapped in the patriotic obligation to “support the war” and sold as a “convenience to the tax payer”, taxes for the first time would be deducted (confiscated) before the tax payer ever saw the money. What was the government reasoning? “We are only doing this to make it easier on the taxpayer”.
But even as the government was promoting payroll deducted taxes as a service to the citizens, Congress understood the advantages of people not really seeing the money as it flowed to the government. As Representative Donald H. McLean said (U.S. House Hearings 1943: 85)payroll deductions would serve in , ``protecting the Government revenues not only now, but for all times to come.'' He felt that ``the need for the change in the collection method, due to the increase of the number and type of taxpayers that we have brought into the system.'' that it would be ``good business'' for the government: government ``will have more revenue; ... its people will pay better and be happier about it.'' Representative Frank Carlson (R., Kans.), warned witnesses to use such language, reminding them that the House Ways and Means Committee ``passed a 10-percent increase in our income and corporate taxes a year ago by calling it a defense tax.'' He added that ``the suggestion that we call this tax a war tax is a good one.'' Representative A. Willis Robertson (D., Va.) noted “the word forced is not a euphonious name'', it ``would be much better if we should call it `Victory savings,' or something of that kind'' (U.S. House Hearings 1942, vol. 1: 108). Treasury official Randolph Paul at the same hearing agreed.
And even though support for the war was massive, popular support for payroll deduction for income tax was barely 50%. That was until the government came up with a better sales pitch. There was a real problem in the year the country would switch collection systems. If a “pay as you go” system was adopted in 1943 the tax payer would be responsible for their 1943 taxes being payroll deducted, and their 1942 taxes that they had accrued, basically double taxes in that year. The government’s solution was as sellable as it was deceitful. The Congress eventually passed and the President signed a bill that allowed for the “cancellation of 75% of the 1942 tax liability. When people where presented with the idea that they would escape their 1942 taxes, support soared, even though most government officials realized it was as Former Treasury Department official Elisha Friedman openly called it a ``paper forgiveness”. As Mr. Friedman noted in congressional hearings in 1942, “The `forgiveness' of the small brackets is merely temporary. ... They will pay more later. ... You will forgive the 1942 tax for the little people but in 1944 and 1945 they will be paying at a higher rate. ... Ours is a paper forgiveness for the low brackets.” In other words the revenue lost by not collecting the 1942 tax would easily be made up because the payroll deduction would make tax increases seem painless to the tax payer.
In what has become common practice, we see Congress doing what is good for the government, in deference to what is good for the citizen, and cloaked in the illusion that it is good for the country as a whole. But it is hard to see how anything that injures the citizen can in the long run be a good thing.
And as they say, “the rest is history”. With a payroll deducted income tax in place, separating the tax payers, from their property became easy, people don’t miss what they never had and not many take the time to actually look at their pay checks and realize the volume of money being handed off to the government. As Senator John A. Danaher observed (U.S. Cong. Rec.-Senate 12 May 1943: 4268, 4272, 4282) ``the fact of the matter is the Treasury collections will go up annually rather than down.'' And as Senator Byrd in 1943 predicted ``before the ink is dry on the signatures, we will call upon the Congress to increase the existing tax rates in proportion to the cancelation [sic] and forgiveness we extend to the taxpayers.'' He believed that ``so-called benefits to the taxpayer'' would then ``quickly sink into complete oblivion'' so that ``most taxpayers would be injured rather than benefited''
Fast forward to 2011 and the federal government officially hit the 14 trillion dollar debt limit this week. In 2010 social security recites were 49 billion dollars short of payments, and the country is racking up one trillion dollars of debt per year. The total 2011 federal spending is at 3.7 trillion dollars, or almost 7 billion dollars a minute! The federal government uses payroll deducted taxes to siphon off ever increasing amounts of money to fund every function Congress can dream up with almost no regard to constitutional limits of that spending. Now conservatives like Paul Ryan are pushing back against out of control spending and focusing on how much money the government actually goes through.
The response given to the Los Angeles Times last Thursday from Mr. Reid, democratic leader of the Senate is ““It would be foolish for us to do a budget at this stage.”
Foolish Mr. Reid?
Foolish would be a government that borrows 40% of the money it spends.
Foolish would be a government that buries its head in the sand as Medicare and Social Security careened toward certain bankruptcy that will certainly destroy the economy.
Foolish would be trying to convince the American people if we just increase taxes on just 5% of the population that it will fix everything.
Foolish would even be an American population allowing our elected leaders to get away with such foolishness.
But most foolish of all would be not doing your job and create a budget that deals with the financial disaster that you and your elected colleges have created - unless of course we are only taking about politics and not actually about governing.
The federal government pulled the wool over our eyes in 1943 as Americans tried to save the free world from Fascism. It’s now time we take off the blind fold, really look at what is happening in Washington and fix the problem.
