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Jewish World Review April 9, 1999 /23 Nissan 5759

Mona Charen

Mona Charen
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How to do something
about taxes

(JWR) ---- (
THE APRIL 15 TAX DEADLINE LOOMS, yet Americans are complacent. Why do they not seethe with indignation? Because for many, the April 15 deadline means a refund, not a payment. The date has been defanged.

Wall Street Journal editor Amity Shlaes traces the history of withholding and other aspects of our overweening tax code in her jazzy new book The Greedy Hand. A chronicle of America's hate/hate relationship with taxes, this book offers more new information than you would think possible about a familiar topic and does so in a brisk, highly accessible way.

The trick of withholding was devised by Beardsley Ruml, treasurer of the Macy's department store and adviser to President Franklin D. Roosevelt during the Second World War. Taxes were hiked sharply after the Japanese attacked Pearl Harbor, but the resulting tax bills were so huge that the nation faced massive civil disobedience. "Suppose we have to go out and try to arrest 5 million people?" a troubled Treasury secretary wondered.

It was Ruml who provided the answer. He had noted that consumers were willing to shell out far more money if they could pay in small bites -- the installment plan. The government could do the same, he suggested, taking a bite out of each paycheck before the worker ever got his money. Ruml even devised a Madison Avenue-style slogan for the program. He called it "pay-as-you-go."

And we have been paying ever since, long after the initial patriotic cause, World War II, was won.

Not that we understand the code and what it demands of us. We don't and haven't for a very long time. Shlaes quotes a letter from FDR himself to his own commissioner of revenue, explaining that he has been unable to calculate his taxes for calendar year 1937 because of the complexity of the tax rules.

"As this is a problem in higher mathematics," he pleaded, "may I ask that the Bureau let me know the amount of the balance due?"

The success of H&R Block is a living monument to the absurdity of the tax code. Shlaes notes that in 1998, H&R Block outlets could be found in 8,780 towns in 50 states. "Walking down Main Street America, citizens are four times more likely to encounter an H&R Block office than they are to encounter the Gap."

When Americans can feel a tax, as in a sales tax, they will go to incredible lengths to avoid it. What is the biggest tourist destination in America? If you guessed Disney World or the Grand Canyon, you'd be wrong. It is the Mall of America, outside Minneapolis, Minn. The mall sports an amusement park, an aquarium, an 18-hole miniature golf course and more. But what marks it as a tourist mecca, Shlaes believes, is its status as a tax haven. Minnesota charges no tax on clothing.

It isn't that Shlaes is a radical. She doesn't burn to abolish the Internal Revenue Service. But she does demonstrate very clearly that taxes are damaging our economy, interfering with our most personal decisions such as whether to marry or have another child, and punishing our success. The rich, she writes, still avoid taxes through available loopholes, but the strivers, those who by hard work achieve some success, are slapped with confiscatory rates of 50 percent. When Leona Helmsley said, "Only little people pay taxes," the nation was appalled at her arrogance. But Shlaes adds that they may also have secretly believed that she spoke the truth.

"The Greedy Hand" is not an anti-tax brief. It is a plea for a saner, simpler, fairer tax code. Her solutions are common-sensical. The most far-reaching reform she proposes is a constitutional amendment limiting taxes to a capacious 25 percent of our income, and she endorses the idea of CATO scholar Stephen Moore, who has suggested that taxpayers be offered a choice: file under the old system, or select the flat tax, whichever is better. This would disarm the special-interest lobbies that have been able to strangle other tax-reform attempts in the cradle.

It takes a special gift to say so much that is new about a subject that is so well plowed.

Shlaes has that gift.


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©1999, Creators Syndicate