4 ms·

There's good evidence for this. That was part of the reason the Feds pushed employers to do withholding "on our behalf" during the 1930s. Prior to that, taxes w

There's good evidence for this. That was part of the reason the Feds pushed employers to do withholding "on our behalf" during the 1930s. Prior to that, taxes were filed quarterly and then only a small % of people. But people actually saw how much they paid. Withholding was a clever and subtle way for us to never see part of our paycheck so then any tax return we get feels like a bonus when it was actually just an interest free loan to the government. Another way to look at it.. people here talk about $Xk that they make but it's always pre-tax. Ask the same people what they make post-tax and I'd wager less than a quarter can answer it accurately.

sidlls 10y ago
How can one not know what they make post-tax, at least well enough to not be off by a few dollars? That is, after all, what one has to actually pay bills with. I know what my net earnings after taxes, retirement, etc. are to the nearest dollar, every paycheck. When I was substantially poorer (in academia, and prior to that school) I knew down to the penny (as a function of hours worked, even, when I worked hourly pay jobs).
- rbcgerard 10y ago
  I think the allusion was to what their all-in tax rate is. Everyone knows what their take home paycheck is, but ask the same person what their effective tax rate was for the year, and most people don't have a clue (over withholding, 401k deduction, mortgage interest deduction, state and property tax deductions, phase outs etc)
  - secabeen 10y ago
    Not everyone uses it of course, but TurboTax includes your effective tax rate in the Tax Summary they provide at the end of the process.
    - lern_too_spel 10y ago
      According to the article, people using TurboTax is why we have this problem. You are not going to convince anybody to use TurboTax in this forum.
- sampo 10y ago
  > How can one not know what they make post-tax, at least well enough to not be off by a few dollars? In the US, I guess you can look at how much salary appeared in your bank account, and multiply it by 12, to get the yearly salary. In European countries, there are holiday bonuses and in some countries a 13th month salary, so the yearly income is something between 12.5 to 13.5 times the monthly pay.
- cmdrfred 10y ago
  I think the point is they don't want Americans doing the math of taking their gross earnings and subtracting a percentage of it and being reminded of the specific percentage of tax paid and gross taxation every quarter. Taking it from each paycheck quietly is a softer blow than all at once.
  - desas 10y ago
    Don't Americans get pay slips which state how much they earned gross, how much tax & social security they paid (in dollars) and much they earned net?
    - lutorm 10y ago
      Yes but that's just how much is withheld, not your final tax amount.
      - desas 10y ago
        For most Brits, most of the time they're one and the same - the taxman will tell your employer your tax code (= your tax free amount) and it's usually the same offset from standard each year. From this thread it appears that American taxes have more complicated rules.
  - caseysoftware 10y ago
    It would be fascinating to change Tax Day from April 15th to the first Monday after the Federal election in November. I'm not willing to predict the results but it would cause some interesting debates.. imagine everyone being in the middle of their taxes when they cast their votes.
- zeveb 10y ago
  > How can one not know what they make post-tax, at least well enough to not be off by a few dollars? That is, after all, what one has to actually pay bills with. In my case, because I spend significantly less than I make, so I don't really need to think about my monthly bills. Yes, that's an incredible luxury, and yes I have friends and family for whom even a few tens of dollars of unexpected expense at the wrong time can mean disaster (and yes, I help them out). Like you, when I made minimum wage I knew my after-withholding figure. But now? I honestly don't know.
krrrh 10y ago
One interesting, and somewhat ironic, historical footnote to this, is that Milton Friedman was part of the group that conceived of and implemented employer withholding as we know it while he was working at the Treasury department. Though by his account it was introduced during WWII and not in the 1930s. ref: http://conversableeconomist.blogspot.be/2014/04/how-milton-friedman-helped-invent.html http://conversableeconomist.blogspot.be/2014/04/how-milton-f...
- caseysoftware 10y ago
  You're right, income tax withholding wasn't implemented until 1943. Social Security withholding was introduced in 1935. I was probably combining the two. Thanks for the correction. Ref: http://www.investopedia.com/articles/tax/10/understanding-tax-withholding-system.asp http://www.investopedia.com/articles/tax/10/understanding-ta...
throwaway4job 10y ago
You did not present any evidence of any of Norquist's argument. The top federal income tax rate in the US occurred in 1944, and was 94%. At that point, the 1040 was substantially simpler than they are today, and there were far fewer other forms involved. Since that point in time, filing has become increasingly complicated, but the tax rate has declined. If your "argument" had any merit, this would not be the case. Grover Norquist purposefully steals hundreds of millions of hours of time and billions of dollars from Americans, every year, in the hope that we won't realize that he is actively making government less efficient, more burdensome, and worse. If he wants to run an ad campaign, that's fine. But what he's doing right now is stealing time and money from every single American to push his agenda.
djstein 10y ago
>Ask the same people what they make post-tax and I'd wager less than a quarter can answer it accurately. just sad. so many people skip basic budgeting..
kelnos 10y ago
Yep, it's all just psychological warfare. The destruction of the tax prep industry in the US would make me so happy that it would overshadow any negative feelings I might have about my tax payments being more transparent to me. The numbers quoted in the article are insane. Over $10 billion that could be spent on actual useful economic output, wasted. Hours and hours of individuals' time, wasted. It's disgusting. In some ways I find the preservation of the tax prep industry to be even worse than Trump's recent attempts to protect/resurrect coal industry jobs.
- dhimes 10y ago
  Even though I really like my accountant I completely agree with you.
- emn13 10y ago
  You realize it's much worse than that right? Because $10 billion is just the direct cost of those firms, not the opportunity cost or the social cost, nor even the manhours and software cost. The six-billion man-hours alone I'd value at a ballback of $120 billion; though this is hard to truly estimate. Given that many figures simply assigned zero value time not spent working (and that's clearly nonsense), and that somebody earnign $20 is hopefully worth more; that sounds conservative to me. Complex tax systems also encourage simply avoiding engaging in anything that would make tax burdens more difficult to figure; they cause stress (a public health issue that's still consistently ignored); and they encourage cooking the books to make life simpler - which in turn is an enabler for fraud. The real-world cost of US tax complexity is likely at a bare minimum 100 billion dollars; possibly as much as 10 that; and that's excluding factors that are excluded from GDP; i.e. the value of things like lifestyle/stress but also more economic-oriented factors such as reduced economic agility.

sidlls 10y ago

How can one not know what they make post-tax, at least well enough to not be off by a few dollars? That is, after all, what one has to actually pay bills with. I know what my net earnings after taxes, retirement, etc. are to the nearest dollar, every paycheck. When I was substantially poorer (in academia, and prior to that school) I knew down to the penny (as a function of hours worked, even, when I worked hourly pay jobs).

rbcgerard 10y ago
I think the allusion was to what their all-in tax rate is. Everyone knows what their take home paycheck is, but ask the same person what their effective tax rate was for the year, and most people don't have a clue (over withholding, 401k deduction, mortgage interest deduction, state and property tax deductions, phase outs etc)
- secabeen 10y ago
  Not everyone uses it of course, but TurboTax includes your effective tax rate in the Tax Summary they provide at the end of the process.
  - lern_too_spel 10y ago
    According to the article, people using TurboTax is why we have this problem. You are not going to convince anybody to use TurboTax in this forum.
sampo 10y ago
> How can one not know what they make post-tax, at least well enough to not be off by a few dollars? In the US, I guess you can look at how much salary appeared in your bank account, and multiply it by 12, to get the yearly salary. In European countries, there are holiday bonuses and in some countries a 13th month salary, so the yearly income is something between 12.5 to 13.5 times the monthly pay.
cmdrfred 10y ago
I think the point is they don't want Americans doing the math of taking their gross earnings and subtracting a percentage of it and being reminded of the specific percentage of tax paid and gross taxation every quarter. Taking it from each paycheck quietly is a softer blow than all at once.
- desas 10y ago
  Don't Americans get pay slips which state how much they earned gross, how much tax & social security they paid (in dollars) and much they earned net?
  - lutorm 10y ago
    Yes but that's just how much is withheld, not your final tax amount.
    - desas 10y ago
      For most Brits, most of the time they're one and the same - the taxman will tell your employer your tax code (= your tax free amount) and it's usually the same offset from standard each year. From this thread it appears that American taxes have more complicated rules.
- caseysoftware 10y ago
  It would be fascinating to change Tax Day from April 15th to the first Monday after the Federal election in November. I'm not willing to predict the results but it would cause some interesting debates.. imagine everyone being in the middle of their taxes when they cast their votes.
zeveb 10y ago
> How can one not know what they make post-tax, at least well enough to not be off by a few dollars? That is, after all, what one has to actually pay bills with. In my case, because I spend significantly less than I make, so I don't really need to think about my monthly bills. Yes, that's an incredible luxury, and yes I have friends and family for whom even a few tens of dollars of unexpected expense at the wrong time can mean disaster (and yes, I help them out). Like you, when I made minimum wage I knew my after-withholding figure. But now? I honestly don't know.

krrrh 10y ago

One interesting, and somewhat ironic, historical footnote to this, is that Milton Friedman was part of the group that conceived of and implemented employer withholding as we know it while he was working at the Treasury department. Though by his account it was introduced during WWII and not in the 1930s. ref: http://conversableeconomist.blogspot.be/2014/04/how-milton-friedman-helped-invent.html http://conversableeconomist.blogspot.be/2014/04/how-milton-f...

caseysoftware 10y ago
You're right, income tax withholding wasn't implemented until 1943. Social Security withholding was introduced in 1935. I was probably combining the two. Thanks for the correction. Ref: http://www.investopedia.com/articles/tax/10/understanding-tax-withholding-system.asp http://www.investopedia.com/articles/tax/10/understanding-ta...

throwaway4job 10y ago

You did not present any evidence of any of Norquist's argument. The top federal income tax rate in the US occurred in 1944, and was 94%. At that point, the 1040 was substantially simpler than they are today, and there were far fewer other forms involved. Since that point in time, filing has become increasingly complicated, but the tax rate has declined. If your "argument" had any merit, this would not be the case. Grover Norquist purposefully steals hundreds of millions of hours of time and billions of dollars from Americans, every year, in the hope that we won't realize that he is actively making government less efficient, more burdensome, and worse. If he wants to run an ad campaign, that's fine. But what he's doing right now is stealing time and money from every single American to push his agenda.

djstein 10y ago

>Ask the same people what they make post-tax and I'd wager less than a quarter can answer it accurately. just sad. so many people skip basic budgeting..

kelnos 10y ago

Yep, it's all just psychological warfare. The destruction of the tax prep industry in the US would make me so happy that it would overshadow any negative feelings I might have about my tax payments being more transparent to me. The numbers quoted in the article are insane. Over $10 billion that could be spent on actual useful economic output, wasted. Hours and hours of individuals' time, wasted. It's disgusting. In some ways I find the preservation of the tax prep industry to be even worse than Trump's recent attempts to protect/resurrect coal industry jobs.

dhimes 10y ago
Even though I really like my accountant I completely agree with you.
emn13 10y ago
You realize it's much worse than that right? Because $10 billion is just the direct cost of those firms, not the opportunity cost or the social cost, nor even the manhours and software cost. The six-billion man-hours alone I'd value at a ballback of $120 billion; though this is hard to truly estimate. Given that many figures simply assigned zero value time not spent working (and that's clearly nonsense), and that somebody earnign $20 is hopefully worth more; that sounds conservative to me. Complex tax systems also encourage simply avoiding engaging in anything that would make tax burdens more difficult to figure; they cause stress (a public health issue that's still consistently ignored); and they encourage cooking the books to make life simpler - which in turn is an enabler for fraud. The real-world cost of US tax complexity is likely at a bare minimum 100 billion dollars; possibly as much as 10 that; and that's excluding factors that are excluded from GDP; i.e. the value of things like lifestyle/stress but also more economic-oriented factors such as reduced economic agility.