Hannah Frankman – April 24, 2022
2022 is my first tax season writing a check to the government, instead of the other way around.
Up through 2020, I was a W-2 employee working full-time for a startup and having my taxes withheld. I got a pay stub twice a month with a list of the taxes that had been taken out, and at the end of the year I got a nice little refund check – what felt like bonus cash being sent to my bank account.
Tax season was just a pain. I had to take a couple hours every April to organize my paperwork and file everything with the IRS. Not exactly a fun springtime activity, but I was always excited to see how big my refund was going to be.
Extra money at the end of the year! Who doesn’t like that?
In 2021 I became a freelancer, and I started paying my own taxes as an entrepreneur – and tax season suddenly became a very different kind of pain. Every dollar of the money I earned all year had gone straight to my bank account, and I had to calculate it, take out a very large sum, and write a check to the government.
I suddenly realized just how much I was paying in taxes. When you never see the money, the numbers aren’t real – you see the withholding percentages at the bottom of your paystub, but you’re really just focused on the number getting added to your bank account. You’re thinking about the money that exists and what you plan to do with it, not the hypothetical money that could have existed if the government wasn’t taking it – because what’s the practical purpose of that thought exercise?
But when all your earnings are coming straight to you, and you’re the one doing the work of separating your taxes from the rest of your earnings and sending it off to its confiscators, all the money is real to you. And when you see it all calculated in lump sum, you get some sticker shock.
My pre-2021 regularly-employed self was like most people in this country; I had no real concept of the taxes I was paying. For most people, taxation is something they never see. They experience it only as withholdings, refunds, and some ghost numbers at the bottom of their pay stub – nothing else.
In the 17th century, Jean-Baptiste Colbert, finance minister to the luxury-loving and war-waging King Louis XIV of France, is supposed to have said that the art of taxation is to pluck the goose in way that gets you the most feathers with the least hissing.
That’s exactly what tax withholding accomplishes (and was designed to accomplish). It averts public resistance to taxes by making taxation less visible, almost an afterthought, so people don’t fully feel the imposition happening.
When people start paying their taxes out of pocket – as I now am – they start to feel more like hissing.
Tax withholding gives the lie to the popular claim that taxes are voluntary payments for government services rendered. If that were the case, the government wouldn’t have to concoct schemes for separating citizens from their money. People would be excited to write a check at the end of each year for the public services they were receiving – or even feel like they were getting a steal.
But people don’t get excited about paying their taxes, and they’re not voluntary. They’re what Frederic Bastiat called “legal plunder” – the legally-sanctioned theft of property from an individual. As Bastiat explained:
“Sometimes the law defends plunder and participates in it. […] Sometimes the law places the whole apparatus of judges, police, prisons, and gendarmes at the service of the plunderers, and treats the victim—when he defends himself—as a criminal. In short, there is a legal plunder.”
Chris Rock echoed Bastiat in a classic bit about tax withholding: “You don’t even pay taxes. They take tax. You get the check, money gone. That ain’t a payment – that’s a jack.”
But because of withholding, most taxpayers don’t fully realize they’re victims of a “jack” (a robbery) quite as much. The geese don’t fully feel their feathers getting yanked, so they don’t really realize they’re being plucked.
But we are. Especially at tax time, we should remember that—and hiss more about it.
Image Credit: YouTube (screen shot)