TRUTH in Government Act of 2016

Summary: Transparent Recognition of Unjustified Tax Hoarding in Government Act of 2016 or the TRUTH in Government Act of 2016  This bill repeals provisions of the Internal Revenue Code requiring the withholding of income, Social Security, and railroad retirement taxes from wages. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Transparent Recognition of 
Unjustified Tax Hoarding in Government Act of 2016'' or as the ``TRUTH 
in Government Act of 2016''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) At the onset of the Civil War, Congress passed the 
        Revenue Act of 1861, which imposed a tax on personal incomes 
        and to assure timely collection, taxes were ``withheld at the 
        source'' by employers.
            (2) The need for Federal revenue declined sharply after the 
        war and in 1872, the income tax was abolished and along with 
        it, the Federal withholding mandate.
            (3) With passage of the 16th amendment to the Constitution, 
        Congress swiftly passed legislation creating a Federal income 
        tax, withheld before employee salaries were paid.
            (4) In response to growing taxpayer criticism of the 
        withholding mandate, Treasury Secretary William G. McAdoo 
        stated that ``it would be very advantageous to . . . do away 
        with the withholding of income tax at the source'' because it 
        would ``eliminate a great deal of criticism which has been 
        directed against the law''; a statement reflecting the 
        sentiment which ultimately led to the repeal of Federal 
        withholding authority in 1917.
            (5) In the 1920s and 1930s, income taxes were due on March 
        15 following the end of the tax year and could be paid either 
        in one lump sum on that date or in quarterly installments.
            (6) With the onset of World War II, fearing that taxpayers 
        might refuse to pay the higher tax rates and surcharges 
        associated with funding the war effort, Federal officials, 
        lawmakers, and political leaders such as President Franklin D. 
        Roosevelt used the military crisis to draw on Americans' sense 
        of patriotism and resurrect the Federal withholding authority 
        as a ``temporary wartime measure''.
            (7) The campaign to reinstitute a permanent system of 
        withholding overcame public hostility with the passage of the 
        Withholding Tax Act of 1943 which incorporated suggestions 
        proffered by Beardsley Ruml to eliminate individuals' 1942 tax 
        liabilities by counting amounts paid or withheld in 1943 as tax 
        payments for that year.
            (8) Since that time, Congress has stubbornly refused to 
        repeal the Federal withholding mandate contained in the 
        Withholding Tax Act.
            (9) In fiscal year 2014, the Internal Revenue Service 
        refunded overpayments amounting to over $330,561,145,000 more 
        than actual individual income tax liabilities, effectively 
        denying interest payments otherwise owed to taxpayers and 
        amounting to a hidden tax.
            (10) These overpayments are returned annually in the form 
        of tax refunds to taxpayers who often confuse the payments as a 
        reward.
            (11) According to the Tax Foundation, in 2010, there were 
        58,416,118 tax returns with zero or negative income tax 
        liability, or 41 percent of the 142,892,051 returns filed.
            (12) The absence of the Federal withholding mandate leaves 
        employers and employees free to negotiate alternative, private 
        means of collecting and paying Federal income taxes, thereby 
        allowing individuals to voluntarily earn interest on their 
        withhholdings.
            (13) The Federal withholding mandate allows the Federal 
        Government to disguise tax increases and hampers Federal 
        accountability and transparency by requiring the assistance of 
        an intermediary tax collector.
            (14) Complying with the Federal withholding mandate imposes 
        costly burdens and legal liabilities on employers forced to act 
        as de facto IRS agents, without compensation for lost time and 
        resources.
            (15) Referring to the Federal withholding mandate in his 
        work Public Finance in Democratic Process: Fiscal Institutions 
        and Individual Choice, 1986 Nobel Prize winning economist James 
        Buchanan stated that ``The individual who does not have 
        possession of income before paying it out cannot'' sense ``the 
        real cost of public services in a manner comparable to that 
        experienced in a genuine act of outpayment''.
            (16) In a CATO Institute study, Charlotte Twight has noted 
        that ``[W]ithholding is the paramount administrative mechanism 
        enabling the Federal Government to collect, without significant 
        protest, sufficient private resources to fund a vastly expanded 
        welfare state.''
            (17) The National Taxpayers Union notes that the 
        incremental nature of withholding masks the true cost of 
        Federal income taxes, which would be much more apparent if 
        individuals had to write monthly, quarterly, or annual checks 
        to the Federal Government.

SEC. 3. PURPOSE.

    The purposes of this Act are--
            (1) to increase transparency and accountability in the 
        Federal tax system by providing the public with a more accurate 
        account of--
                    (A) the annual tax burden; and
                    (B) the Federal budget deficit;
            (2) to decrease the overall tax burden and increase the 
        personal wealth of taxpayers by allowing for the personal 
        collection of interest during the fiscal year on overpayments 
        that are otherwise used by the Federal Government to partly 
        avoid interest payments;
            (3) to decrease the burden on employers by freeing them 
        from the task of collecting income tax withholding from their 
        employees; and
            (4) to end the deceptive practice of masking higher tax 
        rates from taxpayers.

SEC. 4. REPEAL OF FEDERAL INCOME AND SOCIAL SECURITY TAX WITHHOLDING 
              MANDATE.

    (a) In General.--The following provisions of the Internal Revenue 
Code of 1986 are hereby repealed:
            (1) Section 3102 (relating to deduction of social security 
        tax from wages).
            (2) Section 3202 (relating to deduction of railroad 
        retirement tax from compensation).
            (3) Chapter 24 (relating to income tax withholding).
    (b) Requirement of Estimated Tax Payments for Employee Social 
Security Taxes.--Subsection (f) of section 6654 of such Code is amended 
by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), 
respectively, and by inserting after paragraph (2) the following new 
paragraph:
            ``(3) the taxes imposed by section 3101(a) and 3201(a), 
        plus''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid on or after the first January 1 occurring after 1 
year after the date of the enactment of this Act.

SEC. 5. CONTINUED VOLUNTARY TAX WITHHOLDING.

    (a) Authority of the IRS.--Nothing in this Act may be construed to 
limit the authority of the Internal Revenue Service to accept voluntary 
tax payments from employers electing to continue collecting Federal 
income taxes from employees.
    (b) Voluntary Employer Participation.--Nothing in this Act shall be 
construed to prevent voluntary employer sponsored withholding of 
Federal income taxes on behalf of employees.
    (c) Voluntary Employee Participation.--Nothing in this Act shall be 
construed--
            (1) to require any employee to participate in an employer 
        Federal income tax withholding system; or
            (2) to prevent any election of an employee to opt in to an 
        employer Federal income tax withholding system, with all terms 
        and conditions for participation being negotiable between the 
        employee and employer.