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Sunday, July 1, 2001

Honesty at Last

Payroll Deductions Are Taxes, Too

Budget surpluses and a possible tax cut make people say funny things. Folks who never cared a fig about the national debt suddenly are fiscal hawks, and the guardians of the pretense that Social Security is a pension program now are willing to talk about it in other terms.

It is a peculiarity of tax cutting that only people who actually pay taxes can have their taxes cut. It must be a law of the universe. Nevertheless, that peculiarity disturbs commentators of a statist bent. If you say to them that it seems only just for tax cuts to go to the taxpayers, they are apt to say, with the expression of a patzer who just captured a pawn, that plenty of low-income people who don’t pay income taxes do pay the Social Security tax and should get a tax cut.

Indeed they do and should. Any libertarian is delighted to hear the champions of Social Security acknowledge that the payroll deduction is really a tax. They’ve been in denial about this for decades. The “C” in FICA, remember, stands for “contribution.” When Social Security was passed, the deductions were portrayed as contributions to one’s personal pension fund. We know that there is no fund and that the money is spent as soon as it is received.

So we may regard as progress the acknowledgment that those deductions are indeed taxes. And further, we of a tax-hating bent may also rejoice at any suggestion to cut or, preferably, eliminate the payroll tax and abolish Social Security. But don’t hold your breath waiting for action. Most of the people who bring up the subject don’t want to tamper with Social Security. They just want to throw sand in the gears of the income-tax-cut machine. Besides, cutting the payroll tax for low-income people while leaving the rest of the system intact would just make Social Security even more of a welfare program than it is now.

* * *

U.S. politicians routinely extol “self-government.” But over the years the definition of that term has changed in America, and with it, writes Hans Eicholz, the notion of the state.

“Smart growth” is all the rage for government planners these days. But is it only a euphemism for telling others how to live? H. Nathan Hart and Paul Cleveland take up that question.

Sunshine is a movie that depicts three generations of a family coping with the changing regimes in Hungary. Matthew Hisrich finds some lessons for our own time.

For a very long while, sometimes loudly and sometimes quietly, a group of zealots has been plotting to take away our inches, quarts, and pounds and replace them with centimeters, liters, and kilograms. Peter Seymour has the history of the heroic American resistance and the current status of the scheme.

Are Napster and its associates a band of thieves who pillage musical performers by ignoring their copyrights? Or are copyrights and patents a form of state-granted monopoly privilege that can’t bear up under classical-liberal scrutiny? Ilana Mercer sorts out the issues.

The civics textbooks teach that zoning is the local government’s way of assuring a proper quality of life for residents. Andrew Morriss’s brush with his town’s planning board taught him a different lesson.

The socialists’ latest bogey is globalization with its alleged attendant evils, including the exploitation of people in the developing world. Things are so bad that the capitalists use one group of poor people to harm another. But Barry Loberfeld doesn’t see it that way.

Countries that want to make the transition from statism to freedom would do well to look at some examples in Latin America. Christopher Lingle has the details.

James J. Hill is in the pantheon of distinguished American entrepreneurs. And he wasn’t fond of the federal government. Daniel Oliver tells the story of the great railroad man.

Government deposit insurance promises that people’s money is safe in a bank or savings and loan. Unfortunately, government has often prohibited a better form of protection, says Larry Schweikart.

This month the columnists ruminate on a variety of provocative subjects. Donald Boudreaux wonders if we need the state at all. Lawrence Reed reminds us that Prohibition still exists. Doug Bandow sees continuing inanities in the Balkans. Thomas Szasz warns of danger in government’s subsidizing faith-based organizations. Dwight Lee continues his discussion of pollution. Mark Skousen points out the best places to study Austrian economics. Walter Williams knows a tyrant when he sees one. And Aeon Skoble, pondering claims that capitalists should love the estate tax, objects, “It Just Ain’t So!”

Books coming under scrutiny from our reviewers deal with Karl Marx, Julian Simon, the Food and Drug Administration, egalitarianism, the stock market, and the unintended consequences of “reform.”

—Sheldon Richman

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.