It’s been a week since the president’s State of the Union speech, and my disappointment has yet to abate. Much to the disgust of my radio listeners, I rated the speech a “B” on foreign policy and a “D” on domestic policy for a composite “C” grade.
My chief complaints with President Bush’s speech are centered on three areas. First, there was not one mention of one single government spending program that was to be targeted for elimination. Not one. As long as taxpayers are paying college co-eds 75 bucks to insert electronic probes into their bodies and sit back to watch a porno movie, we have programs to be eliminated.
Secondly, Bush was simply not strong enough in his defense of the concept of income tax cuts only for people who actually pay income taxes. Contrary to current liberal dogma, not every American listens to talk radio, the only venue where the “who pays what” statistics are regularly brought forth. My guess is that jaws would have dropped in Joplin if Bush had told the nation that the top 1 percent of taxpayers the Democrats are so fond of slamming actually pay almost 38 percent of all income taxes – though they earn only 17 percent of the income.
My third area of disappointment was the lack of a call for a complete, top-to-bottom overhaul of our system of taxation. It’s broken, it’s unpopular (at least with those who actually pay taxes) and it simply has to go. America is ill-served with a tax system that punishes achievement and rewards a lack of ambition.
Perhaps the president’s failure to call for an overhaul of our tax system is understandable. It’s hard to generate interest in tax reform in a country where almost one-half of wage earners don’t pay income taxes anyway – and most of those who do pay taxes couldn’t tell you how much.
Last week, a friend of mine – a life-long Democrat – called to tell me that he was considering his first vote for a Republican in 2004. He had just earned a $10,000 bonus. He knew the bonus was coming – knew it about a month or so – and had imagined the many things he could do with that money. When the check was delivered to him last week, he was dismayed to see that his total was less than $6,000. Over 40 percent of his bonus had been eaten up in income and payroll taxes.
Why was he so surprised, so shocked? He gets a paycheck every two weeks, and the same exact thing happens to each and every one of those checks. Each and every check is reduced by 40 percent or more by withheld income and payroll taxes. So, why was he caught so off guard by this bonus check?
Do I have the answer? You bet!
It’s all about mindset and expectations. My friend has been conditioned throughout his working life to not think in terms of his total salary, but rather in terms of his “take-home” pay. If you approach almost any salaried American on any given April 15 to ask them how much money they make every pay period, if they tell you anything at all, they will tell you what they “take home,” not what they actually earn. Ask them what the gross amount of their typical paycheck is and you will see a face normally reserved for brook trout. They don’t know. They only know what they “take home.” When the check comes, there are no surprises. Every penny of the take-home pay was there, and the rest had been forgotten long before.
Not so with the bonus check. My friend earned a $10,000 bonus and that figure was sticking in his mind through the four-week wait for the money. Realization dawned quickly when he opened the envelope … taxes. Forty percent … gone! The anger welled and it became time to start rethinking his continued support for the tax-and-spend Democrats. Suddenly, the idea of a tax cut sounded rather good!
The culprit here is withholding. The system of withholding income and payroll taxes from employee paychecks has numbed tens of millions of Americans to just what they are actually paying. Perhaps you don’t know that withholding was supposed to be a temporary program! It was instituted during World War II as a way to generate a much-needed cash flow for a nation that needed to build the implements of war. The promise to Americans was that withholding would cease after the war, and citizens would go back to calculating and paying their taxes every April.
What happened to this promise of a temporary withholding program? Politicians, that’s what. Politicians soon discovered the magic of take-home pay. They found out that under withholding most people stopped thinking about the taxes they paid, and started thinking solely in terms of take-home pay. This was a perfect atmosphere for higher taxes and spending … a politician’s nirvana.
At the very least, Americans should have some clear idea of how much they are paying to cover the cost of government. Withholding stands in the way … and politicians are certainly not anxious to change the system.