End Withholding, and Let Buffet and Gates Pay The Difference

Matt Towery

4/18/2008 12:01:00 AM - Matt Towery

This column isn't going to read very profound or intellectual. And I'm sure others have written before what I'm writing again now. But read on, and let's have a little fun.

During this tax-filing week, I've overheard the annoyed mutterings of several of my employees as they return from their visits to the tax preparation offices.

My co-workers are pretty smart. They already know too well that they are taxed to death. So they aren't shocked when they prepare their taxes and find out that, despite the withholdings from their regular paychecks, they still owe additional money to Uncle Sam. But this knowledge and cynicism still doesn't keep them from being upset.

Far more eye opening is that there's a huge segment of the American population that believes they pay no taxes at all!

You read right. We polled full-time employed Americans and asked them, "Last year, did you pay taxes to the federal government, get a refund or both?"

An amazing 40 percent of respondents said they received a refund only. They didn't say they paid taxes and then received a refund. They only said that they received a refund.

Nearly half the country believes that they don't pay taxes to the federal government. They probably know they pay sales and other taxes, such as tolls. But because of our system of payroll withholdings, these folks never notice that on their pay stubs, it says clearly that they are taking home a lot less money than they are being paid by their employers.

So is it any wonder that when this vast portion of the American public is asked whether they believe we should all pay more taxes, in order to bankroll certain popular causes, that they're often all for it?

Similarly, many people will usually support increasing taxes on "the rich." They figure that it's the wealthy who are paying all the taxes anyway, and not themselves. So why not have the rich pay even more?

As long as we hold to a very loose definition of "rich" in this country, then it's true enough that "the rich" really do pay the vast amount of taxes to the government. But that definition of rich is, for example, a wife who makes maybe $85,000 a year, and a husband who makes $65,000.

Of course, the fact that they first pay darn near half of their income in state, federal and property taxes before they get to spend a dime on themselves -- well, that doesn't really matter.

Every time I read about somebody like Bill Gates or Warren Buffet is talking about how wealthier Americans should pay more taxes in America, I have to laugh.

For fun, let's define "wealthy" at $100 million of "net worth." Now let's include in that net worth all the donations these gazillionaires make to their own (tax-exempt) foundations and trusts; and let's tax all that at a rate of 90 percent. I wonder if Gates and Buffet would be so wild then about the idea of raising taxes on the wealthy?

Or we could just do away with withholding for, say, one month a year. That way, we won't destroy national cash flow. (Oh, I forgot that the feds can just print cash on demand.)

If we stopped withholding for one or two pay periods, we'd probably see that 40 percent polling number drop. People would figure out quickly enough that they are being taxed, and how.

My guess is if tax time meant that everybody had to reach into his or her own bank accounts for the full tax amount owed, there would be a new mindset about taxes.

Why don't we try it? If John McCain can propose a gas tax holiday, why not a payroll withholding holiday?

Here's why not: Because if people don't think about the fact that they have to pay taxes, then they won't march to Washington, pitchforks in hand.

If they did march that march of anger, their unhappiness wouldn't necessarily help either political party. Yes, the people would blame the Republican administration for letting spending get out of control. But their support for Democrats -- who never met an entitlement they didn't like -- would wane as well.

But hey, never mind already. As the song goes, "It's just a fantasy it's not the real thing." This is just a thought experiment, after all; it's not the work of an intellectual.

Then again, maybe that's a good thing.