Cato Daily Podcast
End Federal Withholding to Clarify What Government Takes
Apr 15, 2025
Join Adam Michel, Director of tax policy studies at the Cato Institute, as he uncovers the hidden costs of federal tax withholding. He argues that this policy obscures the true burden of taxation, making it harder for taxpayers to grasp their financial obligations. The discussion ventures into alternative tax structures like a negative income tax and a simplified flat tax, aiming to empower citizens with clearer fiscal responsibilities. Michel also contemplates how ending withholding could prompt demands for a leaner government and greater accountability.
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Quick takeaways
- Eliminating federal withholding would enhance taxpayer awareness by making them more conscious of their actual contributions to government revenue.
- The current progressive tax structure complicates compliance for lower-income individuals, suggesting a simpler flat tax may improve fairness and clarity.
Deep dives
Ending Federal Withholding for Clarity
Ending federal withholding could significantly enhance taxpayer awareness of how much is actually contributed to government revenue. By eliminating this automatic deduction, taxpayers would have a clearer understanding of their tax obligations rather than receiving refunds that can create the illusion of a government payout. The proposal argues for a shift towards a system where individuals can make payments reflecting their actual tax liabilities, similar to how independent contractors manage quarterly taxes. This transparency is believed to potentially lead to greater public scrutiny of government spending and demand for less government intervention.
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