New book on FDR & his economy

[Dixon Cannon]

It isn't well known, but...

Milton Friedman is also the father of the federal tax withholding scheme. He lived to regret it and to repudiate it, but it was he who brought forth the idea during WWII that "employers" should be made responsible for withholding a portions of an "employee's" earnings as a set-aside for possible Income Taxes owed at years end. As factory workers were busy working for the war effort, with overtime and family obligations they might forget to "pay their fare share"! ... better to allow Uncle Sam set it aside for you, just in case! :rage:

Thank God for Form 4852!

-dixon cannon

 

[jgilbert]

Not Friedman but Rumi

Milton Friedman did not introduce the idea of Federal witholding during WWII
is was Beardsley Rumi. He work for Macy's. He knew that people loved making small mothly payemtns for their purchases. So if it work there would work for taxes.

Friedman backed the idea and later said that tey were so concerned with funding the war, they did not consider the long term issues.

 

[Dixon Cannon]

Here's Friedman quoted from his June 1995, REASON Magazine interview...

Reason Magazine: You were involved in the development of the withholding tax when you were doing tax work for the government in 1941-43?

Milton Friedman: I was an employee at the Treasury Department. We were in a wartime situation. How do you raise the enormous amount of taxes you need for wartime? We were all in favor of cutting inflation. I wasn't as sophisticated about how to do it then as I would be now, but there's no doubt that one of the ways to avoid inflation was to finance as large a fraction of current spending with tax money as possible.

In World War I, a very small fraction of the total war expenditure was financed by taxes, so we had a doubling of prices during the war and after the war. At the outbreak of World War II, the Treasury was determined not to make the same mistake again.

You could not do that during wartime or peacetime without withholding. And so people at the Treasury tax research department, where I was working, investigated various methods of withholding. I was one of the small technical group that worked on developing it.

One of the major opponents of the idea was the IRS. Because every organization knows that the only way you can do anything is the way they've always been doing it. This was something new, and they kept telling us how impossible it was. It was a very interesting and very challenging intellectual task. I played a significant role, no question about it, in introducing withholding. I think it's a great mistake for peacetime, but in 1941-43, all of us were concentrating on the war.

I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now.

-dixon cannon

 

[Dixon Cannon]

Curiously, Friedman was a Keynesian back in those days. Year later he had this to say about the subject of this thread; "You know, it's a mystery as to why people think Roosevelt's policies pulled us out of the Depression. The problem was that you had unemployed machines and unemployed people. How do you get them together by forming industrial cartels and keeping prices and wages up?"

-dixon cannon

 

[Undertow]

Does anyone disagree with witholding? Personally, I don't mind that my money is held back so that when tax-time rolls around, I'm not paying out the nose. I realize many people argue, "The gov't 'borrows' our money, interest free" but I could care less. They'll get it one way or another. In the same regard, I prefer to escrow my property taxes because I would rather pay over time than have to pay all up front in the end.

Please enlighten me on the aspects I fail to comprehend. Do you that disagree with witholding argue that the gov't may not spend as much if it were abolished? Or perhaps you just want to keep your money and pay when the bill arrives? Is it that the money could be invested and accrue interest while you save it up to pay your federal taxes?

 

[Dr Doran]

Please enlighten me on the aspects I fail to comprehend. Do you that disagree with witholding argue that the gov't may not spend as much if it were abolished? Or perhaps you just want to keep your money and pay when the bill arrives? Is it that the money could be invested and accrue interest while you save it up to pay your federal taxes?

Yes, I don't understand either.

 

[Lincsong]

Does anyone disagree with witholding? Personally, I don't mind that my money is held back so that when tax-time rolls around, I'm not paying out the nose. I realize many people argue, "The gov't 'borrows' our money, interest free" but I could care less. They'll get it one way or another. In the same regard, I prefer to escrow my property taxes because I would rather pay over time than have to pay all up front in the end.

Please enlighten me on the aspects I fail to comprehend. Do you that disagree with witholding argue that the gov't may not spend as much if it were abolished? Or perhaps you just want to keep your money and pay when the bill arrives? Is it that the money could be invested and accrue interest while you save it up to pay your federal taxes?

I like to use the frog in the boiling water analogy. Put a frog in cold water then slowly warm the water up and the frog will not pay attention and eventually die. However, if you drop the frog into already boiling water he'll jump right out. I see it the same way in regards to tax withholding. If the government takes my taxes every week, I will eventually not realize how much they are taking every week and as the tax rate increases I won't know. However, whenever I am forced to pay the taxes I am more aware of what is being paid out and thus will be more vigilant when it comes to taxes.

I do the same with the Check-off at work. The Union wants us to have a check-off where our dues are taken out by the employer just like withholding. The company balks and so do I and many of my fellow workers because we feel the union will get paid once a month by us like every other expenditure. Thus we don't have a Check-off at work.

I had to laugh, when I was laid off and I applied for Unemployment Benefits a couple years ago, the form asked if I wanted 10% of the Benefit withheld for taxes.lol Hell no, I took the full amount.!!!!

This is really why I respect Milton Friedman, he was one of the architects of the withholding, but came to realize that perhaps in the long term it was not a good idea. Very few men admit to something like that.

If some people like withholding that is fine with me, it's their money, however for me, I'd opt out and just write the check in April.

 

[jgilbert]

Does anyone disagree with witholding?

YES! If you had to write the check yourself, in full once a year, you just might question all the spending! Freidman later when on to say about withholding "a triumph of imaginative packaging and Madison Avenue advertising."

 

[Lincsong]

Exactly. As a type of government policy I'm against withholding.

 

[Fletch]

According to the idiocy that is postmodernism, there are no facts -- or, as they spell it, "facts." And everything is determined by agendas and ideologies.

fftopic: Not that the absolute-truth crowd is immune to agendas and ideologies themselves - they just prefer not to fess to it. < / fftopic: >