A Radical Tax Idea I Love
I’m reading a book called More Sex Is Safer Sex: The Unconventional Wisdom of Economics
The idea is that the government should stop taking taxes (payroll and income) out of your paycheck. Then at the end of the year, the IRS mails everybody an itemized tax bill.
This would accomplish two things, in my estimation. First, it would force most Americans to get out their checkbooks and write a big, fat check to the government every year. I don’t know about you, but if I had to write a check for my tax liability, I’m not sure I could get my hand to do it. And that’s the idea. It would make people realize just how much they’re paying the federal government in taxes. I’d reckon the pressure to cut taxes would soon be overwhelming.
The second thing this plan would accomplish is it would force Americans to look at how their taxes are actually being spent. It’s one thing to know (and most Americans don’t) how the government spends your money. It’s quite another to have a bill staring you in the face that looks something like this:
Your $14,500 dollar tax bill goes to fund these things* -
$2,900 Social Security (20%)
$2,900 Defense (20%)
$2,755 Medicare & Medicaid (19%)
$1,305 Interest on national debt (9%)
$1,105 Income security (7%)
$870 Other entitlements (6%)
$580 Education (4%)
$290 Environment (2%)
$145 International Affairs (1%)
$1,740 Non-defense discretionary (i.e. everything else) (12%)
*Figures are actual percentages for fiscal year 2006 courtesy the Concord Coalition
I wonder how long it would take to align the bill with Americans’ true values. Or maybe these reflect Americans’ true values already. Now that would be depressing.
August 7th, 2007 at 11:33 am
Cool idea, though obviously would be difficult to implement (imagine all the people taking out 4 months worth of payroll loans to pay their tax liability).
It would be nice to at least get an itemized listing of what you paid via payroll deduction, and where it went, and that should be pretty easy for the IRS to do.
August 7th, 2007 at 4:59 pm
That will never happen! The reason for withholding in the first place is to keep the public in the dark about how much they’re really paying in taxes and to keep them happy by sending out income tax refunds (which is really just a return of excess withholding) every year. If people had to write lump sum checks for Federal taxes, there’ll be a major revolt next April.
August 7th, 2007 at 7:49 pm
That’s a really good list. I’ve always thought of where my tax dollars went but I never researched it. It’s always fun to see where the money is “supposed” to go, haha.
August 8th, 2007 at 9:52 pm
[…] Personal Finance comes up with a radical tax idea: paying taxes once a year. For whatever it’s worth, I still prefer the current method. I […]
August 9th, 2007 at 4:25 pm
Yes, the whole point of withholding is so that people see tax day as a refund instead of a payment. Its a brilliant strategy that I doubt the government is going to get rid of any time soon. If they do, it will be kicking and screaming.
August 13th, 2007 at 2:17 pm
[…] but controversial, way to save a good amount of money.”KMC from Advanced Personal Finance presents A Radical Tax Idea I Love.Jim from Blueprint for Financial Prosperity presents How To Financially Prepare Your Kids For […]
August 13th, 2007 at 4:44 pm
August 14th, 2007 at 12:53 am
[…] but controversial, way to save a good amount of money.”KMC from Advanced Personal Finance presents A Radical Tax Idea I Love.Jim from Blueprint for Financial Prosperity presents How To Financially Prepare Your Kids For […]
August 15th, 2007 at 12:02 pm
[…] A Radical Tax Idea I Love @ Advanced Personal Finance: I particularly like the breakout of where our tax dollars go. […]
August 15th, 2007 at 3:15 pm
Haha, this is great. I’ve never thought of it till now but nowhere else do we pay for something and not receive an invoice itemizing our purchase. After all, we pay taxes in return for services so we should know what we get for it. The government is accountable to the people.