California Stealin’: Taxation and Theft

California is a fiscal basket case.  There’s no real argument about that.  Now they’re trying to find more underhanded ways to wring more tax dollars out of the citizenry.  According to The Los Angeles Times:

Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners — holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Tax withholding is a scam.  Despite any facile claims of needing a steady stream of income, tax withholding is designed to allow people to ignore the level of taxation and to make people pay more taxes than they rightfully owe.

First off, if the government can spread your tax burden over a long period of time, you’ll notice it less.  Further, by taking the money directly from your employer, you never actually see it.  The government has removed you from the transaction, and you don’t feel the complete tax burden that has been imposed upon you.  However, if they are only taking from you what you owe, there’s nothing too devious about that.

The insidious aspect of tax withholding is that it leads to people paying excessive taxes – taxes beyond what they are legally obligated to pay.

Come April, when we all file our taxes (assuming we do), we all, presumably, are hoping for a refund.  If, after taking an initial stab at completing the ridiculously complex tax forms, we owe money, most of us will look for more deductions or rebates.  If, after taking another pass at the tax forms, we now are owed a refund, most of us are happy.  If, after the initial attempt at our taxes, we are owed a refund, we’re happy.  Basically, we are, in effect, not worried about the amount of taxes we pay; we are worried about getting a refund.

Once we have that refund, we are far less likely to continue to look for more deductions.  We’re satisfied – we have our refund – so why bother?

And, thus, we come around to increased withholdings.  Implementing regulations that command excessive withholdings increases the number of people who will get refunds.  Consequently, it increases the number of people who won’t look for all the deductions they are owed.

But, the government has willfully deceived these people.  They may get bigger refunds, but their tax payment will have gone up even though their tax obligation did not.  It may not be theft, but it’s not that far off.

And, come on, that notion that the government needs the cash and can’t wait until April to get it is an utter lie.  They can just issue I.O.U.s.

(H/T: Veronique de Rugy.)