I
106TH CONGRESS
2D SESSION
H. R. 4855
To restore to taxpayers awareness of the true cost of government by elimi-
nating the withholding of income taxes by employers and requiring indi-
viduals to pay income taxes in monthly installments, and for other
purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 13, 2000
Mr. PAUL introduced the following bill; which was referred to the Committee
on Ways and Means
A BILL
To restore to taxpayers awareness of the true cost of govern-
ment by eliminating the withholding of income taxes
by employers and requiring individuals to pay income
taxes in monthly installments, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Cost of Government
Awareness Act of 2000’’.
SEC. 2. FINDINGS AND PURPOSE.
(a) FINDINGS.—The Congress finds the following:
(1) Withholding of income taxes originally was
imposed as a means of meeting financial burdens
created by World War II; the Treasury Department
believed taking tax payments directly from workers’
paychecks would make it easier to fund government
without objection from taxpayers.
(2) Income tax liabilities have increased expo-
nentially since the imposition of withholding of in-
come taxes. Withholding taxes now represent a very
substantial portion of working taxpayers’ paychecks.
(3) Withholding of income taxes is inherently
deceptive, because taxpayers often are not aware of
the total amount of Federal taxes they pay or what
percentage of their income they pay in Federal
taxes. Thus, withholding taxes hide the true cost of
government from taxpayers, making tax increases
more feasible.
(4) Many taxpayers overpay their Federal in-
come taxes every year through withholding taxes.
The tax refund they receive is their own money, pre-
sumptively taken by the Federal Government. Be-
cause taxpayers receive no interest on overpaid with-
holding taxes, the Federal Government benefits from
an interest-free loan of taxpayer funds. Taxpayers
would be far better served by saving or investing
such money.
(5) Withholding taxes impose an unfair burden
on American employers, who incur tremendous costs
complying with the Federal withholding scheme. Pri-
vate employers should not have to act as agents of
the Federal Government by determining and col-
lecting income tax liabilities of their individual em-
ployees.
(6) Withholding of income taxes effectively cre-
ates an unfair tax on amounts withheld. According
to the Internal Revenue Service, the term ‘‘wages’’
excludes collected taxes within its definition. Yet the
Service does not follow its own rule when it collects
withholding taxes on a taxpayer’s total paycheck.
(b) PURPOSE.—The purpose of this Act is to restore
to taxpayers an awareness of the cost of government, by
abolishing the withholding of income taxes.
SEC. 3. REPEAL OF INCOME TAX WITHHOLDING.
(a) IN GENERAL.—Chapter 24 of the Internal Rev-
enue Code of 1986 (relating to withholding from wages)
is amended by adding at the end the following new section:
‘‘SEC. 3407. TERMINATION.
‘‘No tax shall be imposed by this chapter on any
amount paid after December 31, 2000.’’
(b) CLERICAL AMENDMENT.—The table of sections
for such chapter 24 is amended by adding at the end the
following new item:
‘‘Sec. 3407. Termination.’’
SEC. 4. MONTHLY PAYMENTS OF ESTIMATED TAXES.
(a) IN GENERAL.—Subsection (c) of section 6654 of
the Internal Revenue Code of 1986 (relating to estimated
income tax for individuals) is amended to read as follows:
‘‘(c) NUMBER OF REQUIRED INSTALLMENTS; DUE
DATES.—For purposes of this section—
‘‘(1) PAYABLE MONTHLY.—There shall be 12
required installments for each taxable year, one for
each calendar month.
‘‘(2) TIME FOR PAYMENT OF INSTALLMENTS.—
The due date for each required installment shall be
the 15th day of the following month.’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 6654(d)(1) of
such Code is amended by striking ‘‘25 percent’’ and
inserting ‘‘8.25 percent’’.
(2) Clause (ii) of section 6654(d)(2)(C) of such
Code is amended to read as follows:
‘‘(ii) APPLICABLE PERCENTAGE.—The
applicable percentage is—
‘‘(I) 7.5 percent for the 1st re-
quired installment, and
‘‘(II) for each installment there-
after during the taxable year, the sum
of 7.5 percentage points and the ap-
plicable percentage for the prior in-
stallment.’’
(3) Section 6654 of such Code is amended by
striking subsection (j) and by redesignating sub-
sections (k) and (l) as subsections (j) and (k), re-
spectively.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
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