MSN.com recently challenged visitors to see where their tax dollars go and posted a link to one of their carefully-brewed sites "explaining" the income tax and taxes in general.  It posits that if you, the taxpayer, knew what government was doing with your taxes, "the less painful it [would] be to open your wallet each April." [1]

The writers doing the explaining bear a strong resemblance to the author of Encarta Encyclopedia's article on capitalism, which endorses the tedious lie that Roosevelt saved the free market with government shackling of business.  Laissez-faire had its chance, and its inherently flawed nature almost ruined the economy, so the argument goes.  Thank God for Roosevelt.  [2]

Statists also worship him for getting the public plied to accept force instead of freedom as the norm.  Such was the case in 1943 when Federal Income Tax Withholding became reality.  Formally called The Current Tax Payment Act, this legislation converted a "class tax" into a "mass tax" with the enthusiastic approval of its victims.

Between 1914 and 1942, the public overwhelmingly opposed withholding of income taxes.  Then in 1943 it became law.  How did this happen?

Charlotte Twight, economics professor at Boise State and author of Dependent on D.C., provides a detailed explanation.  [3]  Essentially, it was sold as a benefit to taxpayers, even as government officials regarded it as a means of extorting more taxes.  "Senators and representatives spoke candidly in congressional hearings (U.S. Senate Hearings 1943: 43) of the revenues that needed 'to be fried out of the taxpayers.'" [4]

Any car salesman knows that installment buyers can be induced to pay more by getting them to look at monthly payments instead of total debt.  And in the case of withholding, the state's sell was made easier because the loot they grabbed never reached taxpayers' hands.

Government made excellent use of propaganda during the early years of World War II to promote its new tax policies.  Disney came out with a film called The New Spirit, in which Donald Duck was told it is "your privilege, not just your duty, but your privilege to help your government by paying your tax and paying it promptly.'" [5]  Over 32 million people saw the film in early 1942, and according to a Gallop Poll, 37 percent said it had affected their willingness to pay taxes.

Of course, with a major war underway, everything government proposed was wrapped in the flag.  In testimony before the House, Treasury officials said paying more taxes was nothing compared to the sacrifices our military personnel were making.  To insulate their position, pols called proposed tax increases a "defense tax" or a "war tax" or a "victory tax."

The state also used traditional channels of propaganda, such as supplying story lines to magazines and pressuring radio stations to air plugs for paying taxes.  The feds even recruited God.  According to the commissioner of Internal Revenue, "Thousands of clergymen, at the suggestion of the Bureau, made taxation the subject of at least one sermon."  [6]  

Even with the propaganda machine running at capacity, federal officials viewed the pay-as-you-go method -- withholding -- as the key to imposing tax increases without resistance.

It had taken decades and a combination of political maneuvering and deception to get the public to accept just a basic income tax.  The first income tax came during Lincoln's war but was repealed in 1872 on the grounds of being an emergency measure only.  Even the Internal Revenue commissioner opposed it as "obnoxious to the genius of our people, being inquisitorial in its nature, and dragging into public view an exposition of the most private pecuniary affairs of the citizen."  [7]  It was proposed often in succeeding years and finally passed again in 1894.  The Court killed it in Pollock v. Farmers' Loan and Trust Company.

Between 1895 and 1909, the government fostered support of the tax through vote-buying.  "For instance, 74.7 percent of the increases in annual War Department expenditures on army arsenals, posts, and public works between 1897 and 1908 went to the 17 states" that had opposed income tax legislation. [8]  And the movement of social coercion known as the Progressive Era was picking up steam, as well.

In 1909, President Taft proposed a constitutional amendment to authorize taxation of income from all sources.  Many tax opponents favored it, figuring it would die in ratification.  It didn't.  A "tax-the-rich" mentality prevailed, and the vote-buying scheme apparently paid off.

The amendment passed in February 1913, and in October the same year Congress enacted the first income tax law, which carried with it a provision for withholding taxes "at the source."

Taxpayers hated withholding, and they let their sentiments be known.  In 1917, Congress repealed the installment clause.

Withholding got a boost from government-created crises in the 1930s and early 1940s.  Social Security arrived in 1935 as a payroll tax -- withheld at the source.  The lie in this case was the claim that each "contributor" would have an "account" in D.C. as a nest egg for old age.  Very importantly, it represented a system of collection, payment, and administration needed for withholding.  Then in 1942 Congress passed the Victory Tax, a flat five percent tax above a $624 deduction that required employers to withhold it at the source.

The tax machine was ready for withholding, but the people were still tentative.  The sham known as the Ruml proposal relaxed their fears.  By this scheme, taxpayers would be "forgiven" one year's taxes.  Under the pre-withholding system, taxpayers would pay their 1942 taxes in 1943.  Under withholding, they would also pay their current (1943) taxes each paycheck.  Ruml removed this double taxation by eliminating the 1942 tax liability.  As soon as the press started pushing the plan in late 1942, public sentiment shifted strongly in favor of withholding, especially when people were reminded it would "help the war effort."

It was state legerdemain at its finest.  With incomes on the rise and taxes collected immediately at the source, government's tax haul would increase.  But Roosevelt didn't like it and promised to veto legislation that "forgave" the entire 1942 tax bill.  He finally agreed to a cancellation of 75 percent of one year's tax liability.  "Despite allusions to alleged mutuality of interest, it was widely understood that income tax withholding was chiefly in the interest of the government, not the taxpayer." [9]

The 1943 hearings on the withholding also reflected a new ideology in American life, as exemplified in an exchange between Representative McLean and ex-Treasury official Elisha Friedman:

Mr. McLean: Do you think there is anything inherently wrong in going too far in compulsory deductions from wages?

Mr. Friedman: I can only come back to this, we have got to do it gradually.

Mr. McLean: Whether you do it gradually or rapidly, I am asking you whether there is anything inherently wrong in taking money out of a fellow's pay envelope without giving him the right to say you are privileged to do it.

Mr. Friedman: Is it wrong for a democratic form of government to do anything?  You are the people's elected representatives.  When you decide to do something, it means the people have decided it.  What do you mean, wrong?

Reflecting on the implications of Friedman's statements for Americans, Mr. McLean said, "You are trying to take their independence from them."  [10]

With the passage of federal withholding, not only was opposition to taxation minimized, but as government officials commented, "the groundwork was laid for securing in ensuing years prompt and regular response to revenue demands." [11]

Indeed, by 1980 Treasury Secretary G. William Miller was proclaiming, "It is now a minimal problem to maintain a withholding system on salaries and wages, which is absolutely at the heart of our self-assessment technique of paying taxes."  [12]  

Not only is the relevant tax machinery entrenched, most taxpayers take withholding for granted and don't think to question it.  If more taxpayers knew they were victims of an elaborate con whose purpose has been to fund the overthrow of our founding principles, they would eagerly open their wallets in April -- to help dismantle the government.


1.  Where your tax dollars go: Income tax, the EZ guide

2.  Encarta Capitalism, George F. Smith

3.  Evolution of federal income tax withholding: The machinery of institutional change, Charlotte Twight

4 - 12.  Ibid.