Photo: Flickr / Hourman
Taxes are on Art Cashin’s mind in his morning note today, mainly because they were due just a few days ago.At issue: withholding and temporary taxes, both of which garner substantive attention.
Cashin makes a point on temporary taxes, which don’t seem too temporary when they last more than three quarters of a century.
From Cashin’s Comments:
The latter point, eliminating withholding taxes, was a great favourite of Ronald Reagan. Reagan always said that if you eliminated withholding and folks had to sit down and write that check, it would bring a balanced budget within a year. It is impractical, of course, the budgetary process of most Americans would likely find them in deficit on tax day.
Some have suggested a private sector alternative. Folks could put the money, weekly, in a guaranteed escrow account. That way the money would be there for Uncle Sam but you could earn a little interest on it (very little these days – thank you Mr. Bernanke).
I was fascinated watching a discussion on CNBC on tax day. Folks happily talking of intentional over-withholding so “they would be guaranteed a refund”. Financially sophisticated folks bragging about giving the government an interest free loan. It’s a great country. Ain’t it.
Another aspect of the essay that caught my eye was a bit on the Johnston Flood. Here’s that section:
Another popular gimmick is the temporary tax. Temporary taxes are supposed to be happy taxes—they come in, they fix a problem, and they leave. Sadly, most temporary taxes end up like dinner guests who won’t leave when the party’s over. The Johnstown Flood Tax, the poster child for temporary taxes, is a tax on alcohol sales in Pennsylvania that paid for rebuilding Johnstown after the devastating flood. Don’t recall the devastating flood? You aren’t alone. It occurred more than 75 years ago. Adjusting for inflation, the Johnstown Flood Tax has so far raised enough money to pay for the flood damage 25 times over. Because it now generates a cool $200 million a year for state coffers, it likely won’t be going away any time soon.