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Stop being tax chumps — switch to consumption-based taxation

Opinion Editorial
April 26, 2006

By Mike Krause

Are you getting a tax refund this year? Actually, nobody is, since a refund is what you get when a product or service does not work as promised.

If you are getting money back from the government, you are simply being allowed to keep some of what you earned in the first place.

For over 60 years now, we have been conditioned to be income tax chumps, sending off every detail of our financial lives to complete strangers, and then hoping to be allowed a “refund.”

This conditioning began in earnest with the “Current Tax Payment Act of 1943,” which established broad income tax withholding from wages. Members of Congress openly talked of revenues that needed to be “fried out of taxpayers.”

The real purpose of withholding was to more easily raise and expand the income tax, as was noted in a 1943 congressional hearing on the act: “If you were trying to cure a man of the drink habit, you wouldn’t cut off his supply of liquor all at once, you would do it gradually.”

In other words, Americans who want to keep more of their own money are like substance abusers, and withholding taxes at the source is the cure.

And the conditioning has worked.

In 1940, federal revenues were 6.8 percent of gross domestic product.

In 2003, that number was 16.6 percent, actually down from 20.8 percent at the end of the Clinton presidency.

It is doubtful this could have happened had every taxpayer had to write out a monthly or quarterly check to the government instead of having money withheld at the source.

It is even more doubtful if a consumption-based tax were in place.

As founding father Alexander Hamilton wrote: “It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excesses; If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds.”

With a consumption tax, the government would have no right to snoop about how much you earn.

So it is another tax day, another year of the on-going hoax that funding the government also requires that we obediently report every detail of our financial lives to a government clerk and that government should get its cut before it even passes through our fingers.

Originally Published in the Denver Daily News/font>