October 27, 2005

Remembering a Previous President’s Dumb Move

Filed under: Taxes & Government — Tom @ 6:21 pm

Which President made this speech?
(excerpted to conceal items that might reveal who it is or what year it was)

My fellow Americans:

….. there’s something I think you should know.

It’s about misrepresentations surrounding the withholding tax on interest and dividends. People are being badly misled, and that misinformation shouldn’t go unanswered.

Americans have been arguing over taxes ever since the Boston Tea Party ….. when an angry band of taxpayers dumped a shipload of tea into Boston Harbor. Well, in the spirit of the Boston Tea Party, I’d like to dump all the misinformation you’ve been getting on withholding taxes. In fact, I’d almost like to dump overboard some of those who’ve been spreading this misinformation and scaring people, especially our older citizens, many of whom have written me very frightened.

As you may recall, this whole business started last summer when the Congress passed, and I signed, the law requiring banks and other financial institutions to withhold 10 percent on interest and dividend income.

(This) withholding law ….. is simply a more effective way of collecting tax money that’s already owed, just as employers have been withholding taxes from our paychecks ….. a procedure most wage earners accept as both fair and necessary.

What it really gets down to is this: Even in a law-abiding country like ours, there’s still a minority of people out there who cheat on their taxes. Last year, (the government) lost billions of dollars in taxes on unreported interest and dividend income. ….. I agree with what one editorial writer said about those who cheat. “When they don’t pay their taxes, someone else does — you and me.”

Withholding 10 percent on interest and dividends will allow the Internal Revenue Service to recover (billions) ….. in otherwise lost revenues over the next 5 years — and that’s without taxing honest taxpayers a penny more than they now pay.

Past experience has proven that withholding is by far the most effective means of combating those who don’t pay their tax bill to the government. The only people who stand to lose under this law are those who haven’t been paying their taxes in the first place, and what’s wrong with that?

….. All of this raises an obvious question. If withholding is nothing more than a more effective collection method, what’s all the controversy about? Well, some of the banking interests seem to think withholding will inconvenience them. But we’ve taken measures to make sure this changeover isn’t burdensome. And as for savers, it will actually be a real convenience for many of them. For example, withholding will free many taxpayers from the chore of preparing quarterly tax payments. It will prevent other citizens from being faced with a substantial accumulated tax bill on April 15th. Most wage earners already prefer to have tax withheld from their paychecks, rather than having to come up with the whole bundle on that annual day of reckoning.

Some of the banks and savings and loans have said withholding will reduce the incentive to save. Well, that just doesn’t make sense. Withholding will have a minimal effect on accrued interest.

….. But I think most Americans would forgo (a little interest) if it meant others who are cheating on billions of dollars of unpaid taxes would have to pay their fair share.

The fact of the matter is that those already paying their taxes can get back all of the amount withheld by reducing their estimated tax payments or by adjusting the number of exemptions on their wage withholding.

Thanks to the pressure from a very busy lobby, however, the Congress is now considering repeal of withholding before it’s even gone into effect. This would help no one who’s doing their fair share, but it would let all those who are not paying their taxes on interest and dividends off the hook. So, I’m not about to let it happen. Rather than asking those who are paying taxes to pay more, I say that those who already owe taxes should pay them. And ….. if the repeal passes the Congress, I’m all set to veto it …..

Who made this awful speech in support of an absolutely awful idea? (For starters, imagine the administrative costs it would have imposed on the banking and brokerage systems for collecting relatively puny amounts of revenue a little earlier, and the negative compounding effect on wealth accumulation.)

Ronald Reagan, on April 16, 1983, that’s who.

Reagan, by all reasonable accounts, recovered from this incredible blunder pretty nicely. Withholding of federal income taxes on interest and dividends, one of the single dumbest ideas ever conceived in Washington, never happened; it was repealed later in 1983 before it ever took effect, with no presidential veto. And of course Reagan was reelected in 1984 with the most sweeping Electoral College margin in history.

Almost no one remembers Ronald Reagan’s association with the crackpot idea he and so many others who should have known better were so supportive of in 1983.

Similarly, no one will remember the colossal blunder George W. Bush committed by nominating Harriet Miers if his future nominees are solid, and if he otherwise returns to the principles that got him elected, and reelected.

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1 Comment

  1. Recovering from the quagmeir.

    I am not advocating that we blindly trust the President’s next pick, but, instead, that we prove to the President NOW that he can trust us.

    Trackback by The Cassandra Page — October 29, 2005 @ 6:20 pm

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