Go Big and Grant Milton Friedman His Wish

House Speaker Paul Ryan (R-Wis) held a press conference a few days ago where he said that GOP control of the Congress and White House afforded his party the opportunity “to go big, to go bold.”  There has been talk of rolling back regulations and Obamacare.  That’s good news, but Ryan should consider a bigger and bolder move: End federal income tax withholding. 

The “political establishment” has created a situation where the U.S. is trillions of dollars in debt.  How will the new Congress address that?  The fiscal scandal is too abstract for many voters to grasp so too many of them don’t think twice about supporting new spending measures, such as free college tuition or what have you.  To build the necessary political support for otherwise unpopular spending cuts, Ryan should quickly move to end federal income tax withholding.  If American households would stop viewing their tax refund checks as happy windfalls from politicians and instead better understood how much big government is costing them every year, one would expect to see louder demands to bring runaway spending under control and to downsize the scope of federal programs and operations.  The GOP honeymoon will be over in a few months.  Ending federal withholding will help build support for spending cuts over the next few years and perhaps beyond.

Ironically, it was the late, great Milton Friedman who helped devise the modern income tax withholding system when he worked in the Treasury Department during World War II.  He was fixated on tax collection efficiency at that time, not limiting the size of government.  Late in his life, Friedman said that he wished “there were some way of abolishing withholding now.”  Former congressman Dick Armey (R-Tex) proposed ending withholding when the GOP took control of the House in 1994, but Bill Clinton was never going to sign that measure into law.  Now that the GOP has both the Congress and the White House, it has a real opportunity to go big and bold.  Grant Friedman his wish and get our fiscal house in order.

For related Cato scholarship, go here.