Pay As You Go

One of the more nefarious schemes ever hatched by Congress turns 68 years old this week. It was on June 9, 1943, that the U.S. Congress ordered employers to begin withholding funds from workers’ pay to cover their income-tax obligation. The legislation — passed as “an emergency wartime measure” — was officially called the “Current Tax Payment Act.” But it became known as the “Pay As You Go Tax.”

For the first time in our country’s history, the money an employee would owe the U.S. government in income taxes was taken out of his pay before he saw it and sent to the Internal Revenue Service in Washington. The measure was sold as a favor to workers, who otherwise wouldn’t set aside enough funds to pay their taxes when they came due.

The real effect, of course, was to hide the increasing bite that government would take from everyone’s pay.

Today, most employees think of their “income” as the net amount they receive each payday. They never consider that 20 to 40 percent of their earnings vanished before they received them. Later on, if they do receive refunds of some of these paid-in-advance taxes, they consider them gifts from a beneficent government.

You have to admit it: The folks who think they can spend your money better than you can are awfully clever about how they get their hands on it.

—Chip Wood