“Did you feel it?” Vice President Joe Biden said at his presidential campaign kick-off event in Pittsburgh. He was referring to the “$2 trillion” tax cut, and he answered his own question.
“Of course not. Of course not,” Biden said. “All of it went to folks at the top and corporations that pay no taxes.” As many commentators pointed out, most Americans got a tax cut. On the other hand, there’s more to this “feeling it” business than candidate Biden intended.
This year, “Tax Freedom Day” fell on April 16, five days earlier than in 2018 and 2017. Trouble is, the federal government does not announce: “Know what people? This year you will work for the government a full 105 days into the year. Are you feeling it?”
It falls to think tanks and media outlets to break that news. Still, there’s more to this business of feeling it, particularly for workers.
When they look at their paycheck they see something called “take home pay.” What they take home should be the gross amount, but the government grabs workers’ money before the workers get it. Few workers are aware that it hasn’t always been this way.
As “Crisis and Leviathan” author Robert Higgs notes, “Before World War II individuals who owed federal tax on their income earned in a particular year paid the tax during the following year in quarterly installments.” This system of deferred payment “imposed no great burden and gave rise to few taxpayer complaints.”
As the government began to mobilize for global war, its “revenue demands grew apace.” Economist Milton Friedman and colleagues at the Treasury department came up with the idea of “withholding” federal tax from workers’ paychecks.
The government liked getting the money up front, and after the war, kept the system in place. Friedman later acknowledged that he helped develop the machinery that would make government “too large, too intrusive, too destructive of freedom.”
It happens without significant protest because, with the money taken up front, workers don’t feel the pain of writing those quarterly checks to the U.S. Treasury as freelancers and independent contractors do.
Workers should get all the money they earn before they pay the government. That would be real tax reform, and so would the same tax rate for everybody, instead of higher, punitive rates for those who work harder and earn more.
No politician on the current scene advocates those basic reforms, and Biden would be the least likely to come out against withholding. That intrusive and unjust practice empowers the vastly expand welfare state, which Biden supports. Judging by his campaign rhetoric, he even objects when the government grabs less of the workers’ money through withholding.
Meanwhile, big spenders of the political establishment like to charge that their critics “give tax cuts to the rich.” Actually, to allow a worker to keep more of what she or he earns is not to give them anything. All you politicians out there, are you feeling it?
Lloyd Billingsley is a policy fellow at the nonprofit Independent Institute in Oakland, Calif.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.