The Curse of the Withholding Tax

The income tax allows the government to confiscate the wealth of its citizens. The curseof the withholding tax is that it allows the government to commit this crime systematically, effortlessly, painlessly, and benevolently.

Surprisingly, it was a free market economist who helped the federal government implement the withholding tax in the first place. As was pointed out by the Austrian economist, Murray Rothbard (1926–1995), in his 1971 article "Milton Friedman unraveled":

One of Friedman's most disastrous deeds was the important role he proudly played, during World War II in the Treasury Department, in foisting upon the suffering American public the system of the withholding tax. Before World War II, when income tax rates were far lower than now, there was no withholdingsystem; everyone paid his annual bill in one lump sum, on March 15. It is obvious that under this system, the Internal Revenue Service could never hope to extract the entire annual sum, at current confiscatory rates, from the massof the working population. The whole ghastly system would have happily broken down long before this. Only the Friedmanite withholding tax has permitted the government to use every employer as an unpaid tax collector, extracting thetax quietly and silently from each paycheck. In many ways, we have Milton Friedman to thank for the present monster Leviathan State in America.