How to Cut Your Federal Income Tax - LEGALLY

This afternoon it was time for my once-a-year processing of my tax returns. I filed, electronically, the Form 1040 to the Internal Revenue Service and Form 140 to the Arizona Department of Revenue. I have refunds coming back, a chunk of change that I intend to squirrel away in my savings account for that eventual rainy day that is sure to arrive.

As I was thinking this process over, I thought about something that I heard Rush Limbaugh suggest. I am all in favor of what he suggested even though this method would cause me some personal pain. What this method would do for everybody, though, would be to force awareness on just how much we are paying in taxes and would surely cause a tax revolt. I'll get to what he suggested later on, but first let's review a little history and the present process.

The federal income tax was first tried in 1861, presumably to pay for the costs of the Civil War. This tax was repealed and replaced by another one the following year, and in 1894 the Democrats in Congress passed the first peacetime federal income tax. The Supreme Court got involved a year later and issued a ruling that had the effect of making this tax unconstitutional, mainly by the means in which the income was being taxed.

Some years later, in 1913 specifically, the Constitution was amended to make a federal income tax constitutional, and the top tax rate was only 7%, and that only applied to incomes over $500,000......and half a million was a lot more money back then than it is now.

Over the years, the tax brackets have increased, and the incomes subject to them have been lowered so as to bring more taxpayers into the tax base. I have read that in the 1950s, there wasn't withholding.....you sent in a quarterly tax payment, and you filed a return the following calendar year. Now we've got withholding, which means that your income is confiscated without you being aware of it unless you read the pay stub that your employer issues you if you really want to learn how much they took, which you won't do in most cases as that you don't really want to know. You file your return; if you're lucky you get something back and if you're not then you have to send the IRS a check.

Now stop and think about this process for a moment. A chunk of your income is confiscated each pay period, but you largely don't care because what you're interested in is your "net" pay as you figure out how you're going to make the rent or the car payment or if you can take your sweetie to a cabin in the mountains for a weekend. You might roughly know that they take a third, but I'll bet my mortgage that you cannot tell me how much you pay in each week down to the exact dollar amount without looking at your pay stub. And, I'll bet that you can't tell me down to the exact dollar, just how much you paid in federal income tax last year.

What you can tell me is whether or not you got something back, or if you "owed". It wouldn't surprise me if a few folks getting a tax refund are all smiling and happy about that, thinking that they somehow pulled a fast one on the IRS and they are now getting a jackpot that they can't wait to go blow on some big screen TV or something.

Well the reality is that you "owe", regardless of what you get back. Every time your employer issues you payment for your services rendered to them, you owe taxes regardless, and the more you make then the more they take. And since the process is rendered somewhat painless by withholding (it isn't painless if you end up "owing" when you file, of course), you live with it. I know that. I live with it too. I can't tell you what I paid in income tax last year other than it was several thousand dollars, and no, even though I signed a tax return this afternoon and saw the number I immediately forgot what it was.

But now let's get back to the intended subject of this post. How do we reduce our federal (and state) income taxes, legally? How do we bring this about?

The short answer is an Act of Congress.

OK, you'll buy that, but some of you are asking, how do we go about getting Congress to act?

Thus, the idea that Rush Limbaugh floated. Here it is.

Abolish *ALL* withholding. Your gross pay becomes your net pay, minus deductions for 401K's and the like. What your gross pay is is what you get, and no withholding of taxes.

None.

Zip.

Zero.

Nada.

None.

Next, you send in what you owe in one lump sum payment. And, the day that that lump sum payment is due, is the day before the federal election in November. Think about this some. You send in one huge check on this one Monday in November, and the next day you're deciding whether or not to re-elect your Congressman. Please, think about this some more, and grab a copy of the latest income tax return that you filed. Look at the amount of your tax liability, and then imagine having to write out a check for that amount to send in on the day before the election.

Yes.....look at the amount.....and then try to imagine writing out a check made payable to the Internal Revenue Service for that amount. Think you can swing it?

Now.........what do you think will happen, presuming that we do pay our taxes in this manner? Do you think taxes will go up, or will they go down? As you're writing out a check for five thousand dollars or whatever it is that you owe, are you going to feel like re-electing your Senator or your Congressman? Or even your President? Or are you instead going to vote for someone who's campaigning on a promise to ease your burden?

Now you know the real reason why there is withholding, and why the process is what it is.