Love Your Local IRS Agent Jude Wanniski February 4, 1998

Memo To: Charles Rossotti, IRS Commissioner
From: Jude Wanniski
Re: Paying Taxes

When I was seven or eight years old, in 1943 or 1944, I remember my father coming from work with an announcement that WE WERE RICH! What? What? Until that moment, I'd thought we were poor. For as long as I could then recall, my parents Michael and Constance — Mickey and Connie to their friends -- had let me know that we had to save every penny because there was nothing to spare. When I was seven, my mom would send me to the market across Fort Hamilton Parkway in Borough Park, Brooklyn, to buy milk and bread from the grocer, and I made sure I got the right change from the dollar I presented. I learned to read the canned vegetables and reckon how many ounces of corn or peas I would get from the different brands, so I would buy the ones that gave the most for the money. I remember being sent with a dollar to the Ebinger's bakery at 13th avenue and 49th street to buy a blackout cake, which was 90 cents. It was one of the most traumatic moments of my little kid life, when I reached into my pocket and the dollar was gone. Oh my God. I made such a scene, practically bursting into tears, that a lady customer said she would pay for my cake. No, no, I couldn't let her do it, but finally I did. If she had an extra dollar and I was short the dollar that had been entrusted to me, well I'd rather bring home the cake. I think I told my parents about this ten years later.

But it was about this time my father came home from the Arma Corporation war plant where he worked as a machinist, announcing that we were rich. What fabulous news for little Jude. What was going on? It turned out that it was payday, and with all the overtime he had earned at the graveyard shift, my father's gross income had been enough to push him into the lowest income-tax bracket. My father was 41 or 42 years old and had never before earned enough money to qualify for income tax. It was the first time I'd ever heard of income tax, and it was in the nicest way. Dad explained to me and my brother Terry that only the well-to-do were required to pay income tax, and the fact that he had made as much money as he had was official evidence that we were well-to-do, no longer poor. Back in those days you did not pay income tax until you had after-tax liability of about $3,500 a year. The personal deduction was $500, which meant a family of our size could deduct $2000 from gross income. The only time my father paid income tax in his working life was when he worked overtime at time-and-a-half, which pushed him into the lowest bracket. On the day he came home to celebrate his prosperity, I think the withholding was only $1. When he retired in 1968, as a master bookbinder for the George Schirmer music publishing company in Woodside, Queens, his gross pay was just at $100 per week and his federal income tax only a dollar or two. That was just as the big inflation began, as a result of LBJ and Richard Nixon taking us off the gold standard.

When politicians now get up on their hind legs and screech that they are going to end the IRS as we know it, I hope you can convey to your staff that if we could once again get to the kind of simple tax system we had in those days, Americans would have a positive attitude toward the IRS. You told the Jim Lehrer "NewsHour" last night that Americans are more tax compliant than any other industrialized country in the world, with 87% happily paying what they owe with no trimming. Before the big inflation of 1967-97 swelled the tax brackets with monetary wealth, the only loud complaints came from the tiny number of Americans who were in the superbrackets. It is only when the tax brackets hit people who are barely able to feed and clothe themselves that IRS agents come to resemble storm troopers. You have to get the money from people who should not be in brackets higher than 10%. Worse, there is never a sense from little children that the act of paying income tax is something to which we should all look forward.