Consider these two points.
Over 80% of federal revenue comes from individual income taxes and Social Security, Medicare and unemployment taxes. Most of that money is collected via automatic payroll tax withholding
Meanwhile, based on a recent Rasmussen poll, only 20% of likely voters (the government's customers if you will) believe the federal government has the consent of the governed.
That's not how the 80/20 rule is supposed to work.
If a private business has only 20% customer satisfaction, do you think its revenue will continue rolling in unabated? Of course not. However, most U.S. taxpayers cannot express their displeasure with the government by cutting off its automatic access to their tax dollars. The reason: payroll tax withholding.
With these thoughts in mind, I present the Tax Guy's consent-of-the-governed (COTG) tax plan. It would place the citizens back in charge of paying their taxes by abolishing automatic payroll tax withholding and putting everyone on a quarterly payment plan.
The Problem of Automatic Payroll Tax Withholding
Automatic payroll tax withholding was instituted in 1943. Conceptually, it's easier to part with tax dollars that you never get to begin with.
The government knows that people are very aware of taxes when they have to write checks to cover them; conversely, most people hardly notice taxes that are automatically withheld from their paychecks. Amazingly, this continues to be true today--even though many people are cash-strapped in this lousy economy and even though taxes are a far bigger chunk of payroll than 68 years ago.
Automatic payroll tax withholding ensures that the revenue will keep rolling into the government's coffers, whether the citizens are happy or not. Since revenue is the name of the game, politicians and bureaucrats don't much care if you're unhappy. This bad attitude persists regardless of which political party is in power.
Abolish Automatic Withholding
Make the citizens go through the painful and enlightening process of actually writing checks to cover their federal tax bills, including Social Security and Medicare taxes. (Or better yet, use online bill pay!)
The COTG plan doesn't include any specifics about raising or lowering particular types of taxes for particular types of taxpayers, nor does it include any specifics about where to cut government spending.
I believe all that stuff would quickly be sorted out to general satisfaction--because without general satisfaction, a significant proportion of the citizens would stop sending in their tax checks, the government would quickly run out of money, and there would quickly be a serious attitude adjustment in Washington.
Not Such a Radical Notion
Before you claim that my tax plan is radical and irresponsible, consider these facts:
- Automatic withholding was instituted in 1943 as the enormous cost of World War II required a more-predictable revenue stream.
- Corporations and self-employed individuals pay their federal income taxes without any automatic withholding.
How the COTG Plan Would Work
The government prefers that self-employed individuals pay their annual federal tax bills (including Social Security and Medicare taxes on self-employment income) in four installments. This means writing four checks to the U.S. Treasury each tax year.
Installments are due on 4/15, 6/15, 9/15, and on 1/15 of the following year. However, self-employed individuals also have the right to put off paying any federal taxes on their self-employment income until as late as October 15 of the following year. The only cost is a relatively nominal interest charge on the delayed payments.
A self-employed person who is very unhappy with the government can indicate extreme displeasure by putting off paying his or her annual federal tax bill for many months, and this can be done year after year. It's all perfectly legal.
The COTG plan would simply extend the same tax payment system to everybody. The expected result: Washington politicians would quickly become too scared to keep spending our money on bridges to nowhere and loans to failing solar companies. The consent of the governed would be restored as citizens regain the upper hand on government revenue.
The Last Word
As you can see, the COTG plan seeks only to reestablish government accountability by changing how citizens pay taxes. The plan doesn't actually include any tax policy changes.