Economist Walter Williams likes to describe the Fox News poll that asked people if the money that the federal government spends comes from the citizens, or from a separate source of money the government has on hand. Amazingly, 49% of those responding said that the government had a separate source of money on hand; only 40% said that federal spending came from taxes on the citizens. Eleven percent were not sure.
Granted, the wording on the poll could have been better, but the results show the need for economic education. If large numbers of people think that federal programs are free, then those people will see little need to stop government from spending. And that could mean that the U.S. will soon be following Greece down the path to bankruptcy.
Here are two suggestions for attacking this problem:
First, all Americans who earn incomes, with few exceptions, should pay some income tax. Congresswoman Michelle Bachmann makes this point and says that even if the payment is about $10, all working adults should pay some income tax to repair our roads and help sustain our national defense. It’s part of being an American. If people pay into the government, they will be more interested in where their money is spent. That means less federal funding for turtle paths and more scrutiny of Congress and the president.
Second, we need to do more to make Americans aware of all the ways in which we pay taxes to the federal government. The withholding of income taxes, for example, was a master strategy by President Franklin Roosevelt during World War II to get massive federal funds from people without their fully realizing how much they were actually paying. In FDR Goes to War, I discuss how FDR used the wartime emergency to get withholding passed by Congress.
Under the current withholding system, workers adjust to the monthly deductions and hardly know their wages are being skimmed by the feds. Their checks are docked a set amount, the employer picks up the expense of collecting the money, and the government gets the cash. We need to consider eliminating withholding; if that fails, we could have employers give their employees their full wages, and then require the employees to calculate what is due and send it right away to Washington, DC.
Here are some more ideas to make people more aware of what the federal government is taking from them. People buy gas and cigarettes without fully grasping the taxes they are paying. At the gas pump, perhaps we could require that the state and federal tax on the gas be separated on each receipt, so that drivers could see on each fill-up how much they are paying in taxes. The federal gas tax is 18.4 cents per gallon and many states charge an added 50 cents or more per gallon. The federal tax on cigarettes is $1.01 per pack, and many states add an even larger tax on top of that. Separate that cost out for the buyers of cigarettes so that they see it on every receipt. The more that people understand what they are paying to the government, the more likely they will be to demand accountability from their elected leaders.