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Tax Withholding and Tax Consciousness

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04/26/2005

Joseph J. Thorndike (Director of Tax History Project and Contributing Editor, Tax Analysts) has published What You Don't Know Can Hurt You, 107 Tax Notes 429 (Apr. 25, 2005), which addresses tax withholding and the benefits of tax consciousness. In the article, he quotes Laurence M. Vance in his recent article on Mises.org. He also points out that Milton Friedman regrets his effort to enact an income tax withholding system:

Today Friedman bemoans the effect of that wartime decision. "We gave next to no consideration to any longer-run consequences," he recalled in his 1998 memoirs, Two Lucky People. "It never occurred to me at the time that I was helping to develop machinery that would make possible a government that I would come to criticize severely as too large, too intrusive, too destructive of freedom."

For Friedman and other champions of limited government, withholding makes things entirely too easy. By insulating the taxpayers from their tax bills, it vitiates the bonds of healthy fiscal stewardship. After all, how can we starve the beast if we don't know how much we're feeding it?

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