The Payroll Deduction Scam

One of the biggest frauds of the income tax has been recently brought to light by changes in the tax code.  Because less money was withheld from many people's paychecks last year, people are getting smaller tax refunds.  Some are even owing taxes when they file.  The response to this in articles about the subject shows the complete ignorance on how the process works.  NPR had a February 14th headline of "Anger, Confusion Over Dwindling Tax Refunds.  Is Trump's Tax Plan To blame?"  The Worcester (MA) Telegram writes "Reduced tax refunds surprise Bay State taxpayers," on February 15th.  Some people are complaining that they are getting smaller refunds.  Others that owe say they do not have enough money to pay.

This is because the government of the United States has set up a scam.  Although the money goes to the government, it is taken out of paychecks by employers.  Typically the government takes more than is expected throughout the year.  Then, at the end of the year, people get a refund of the overpayment.  This sets up the government as one giant gift giver.  The IRS sends out millions of checks each spring.  As can be seen by the reaction of people who aren't getting checks this year, this is seen as free money.  Most don't realize that they have paid too much throughout the year. 

There is a simple way to stop this fraud.  Eliminate payroll withholding.  This would be a boon to businesses small and large who spend an inordinate amount of time collecting money on behalf of the federal and state governments.  Having people send a payment on a regular basis would ingrain in them how much of their money is actually being taken.  It would also dissuade any notion that the government is in the business of handing out checks each spring.