The tricks involved in raising taxes
Posted on February 4th, 2005 in General, Economics by tavaresforby ||
If you wonder how the government get so much taxes out of tax payers, Ronald Trowbridge, Ph.D and a fellow at the Texas Public Policy Foundation, will give you a couple of reasons:
- Reduce consciousness of pain. It was a brilliant tax collector, indeed, who thought of the scheme to withhold taxes automatically from our paychecks, thereby reducing the consciousness of payments. Were we instead given the gross amount of our paychecks with the requirement that we pay taxes after the fact, we would be made painfully aware on a regular droning basis of how much tax we pay. But when the government withholds our taxes in advance we don’t miss what we never had.
- Reduce consciousness of pain. It was a brilliant tax collector, indeed, who thought of the scheme to withhold taxes automatically from our paychecks, thereby reducing the consciousness of payments. Were we instead given the gross amount of our paychecks with the requirement that we pay taxes after the fact, we would be made painfully aware on a regular droning basis of how much tax we pay. But when the government withholds our taxes in advance we don’t miss what we never had.
- Use the shell game shift. Political leaders tend to tax us to the highest threshold of acceptable pain. Property taxes have reached that threshold in Texas. To reduce our pain, they try to shift some taxes to a new tax (income tax) or to an existing tax (sales tax). This is called “fair tax reform,” but there are two fatal flaws here: one, there is no aggregate reduction in taxes; two, the alternative avenues of taxation eventually rise to the highest thresholds of pain.
- Change the terminology. Government leaders will reduce or eliminate, for example, homestead exemptions, calling such a “tax shift” rather than “tax increase.” Your taxes increase, but this they argue with a straight face is not a tax increase. I kid you not, this is precisely what happened recently when I lived in the state of Maine.
- Change the terminology. Government leaders will reduce or eliminate, for example, homestead exemptions, calling such a “tax shift” rather than “tax increase.” Your taxes increase, but this they argue with a straight face is not a tax increase. I kid you not, this is precisely what happened recently when I lived in the state of Maine.
- Change the terminology. Government leaders will reduce or eliminate, for example, homestead exemptions, calling such a “tax shift” rather than “tax increase.” Your taxes increase, but this they argue with a straight face is not a tax increase. I kid you not, this is precisely what happened recently when I lived in the state of Maine.
- Make it a wash. Now that Texans can deduct sales tax in itemizing for Federal taxes, many Texan officials, always wanting more money, are asking for a percentage increase in the state’s sales tax. Such, they argue, would only be a painless wash.
I completely agree with Ronald Trowbridge about the scheme of withholding taxes automatically from our paychecks. I think the better approach is to go exempt and pay taxes quarterly (or something to that extent). That way, people really can see how much they pay in taxes. Also, you could make a couple of dollars from interest on your set aside tax dollars.
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