Patrick McKenzie (patio11) on Payroll and Taxes

From an overall great essay worth reading, a couple of excerpts that caught my attention.

On withholding taxes:

Withholding also reduces fiscally consequential tax non-compliance. Most individuals who forget to file a return have already paid all taxes that are due, and may be forgoing a refund against their own interest.

It also has one side effect in the political economy, whose consequences we deal with a century later: withholding is quiet and sending in tax payments is loud. Most taxpayers, including relatively financially sophisticated taxpayers, do not carefully scrutinize their payroll withholding statements. Most do not understand how their payroll tax is calculated; it is simply a law of nature, handled by dutiful clerks somewhere. The only time they really think about tax withholding is once a year when the government pays them. In that blissful moment, their thought is not Wow, I am paying so much in taxes!”

Tax withholding is one of a very few ways in which you can licitly bribe someone with their own money.

On why the IRS has not been able to get into the tax preparation business (presumably making everyone’s lives easier?):

And, relevant to the question of whether Intuit controls U.S. tax policy: it can’t, because that would imply they have wrested control from Norquist. Norquist considers a public filing option a tax increase by stealth and opposes it automatically. (I offer in substantiation ATRs take on a specific policy, which was bolded for emphasis in the original: Americans for Tax Reform rejects the use of unauthorized taxpayer dollars being used to expand the IRS into the tax preparation business and urges states to reject participation in the program.” You can find much more in the same vein.)

December 21, 2023

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