tion, taxes were ‘‘withheld at the source’’ by employ-
ers. 
(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 with-
holding mandate. 
(3) With passage of the 16th amendment to the 
Constitution, Congress swiftly passed legislation cre-
ating a Federal income tax, withheld before em-
ployee salaries were paid. 
(4) In response to growing taxpayer criticism of 
the withholding mandate, Treasury Secretary Wil-
liam G. McAdoo stated that ‘‘it would be very ad-
vantageous to . . . do away with the withholding of 
income tax at the source’’ because it would ‘‘elimi-
nate a great deal of criticism which has been di-
rected against the law’’; a statement reflecting the 
sentiment which ultimately led to the repeal of Fed-
eral 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 
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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 Beards-
ley 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 2009, the Internal Revenue 
Service refunded overpayments amounting to over 
$332,875,709,000 more than actual individual in-
come tax liabilities, effectively denying interest pay-
ments 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. 
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(11) According to the Tax Foundation, ‘‘nearly 
one-third of the 143 million federal income tax re-
turns filed in 2007 resulted in no tax payment,’’ 
meaning that ‘‘the tax filers got back every dollar 
that had been withheld from their paychecks, and 
often more. Roughly 46.6 million tax returns, or 
32.6 percent, are filed by such ‘nonpayers,’ people 
whose exemptions, deductions and credits wiped out 
any federal income tax due.’’. 
(12) The absence of the Federal withholding 
mandate leaves employers and employees free to ne-
gotiate alternative, private means of collecting and 
paying Federal income taxes, thereby allowing indi-
viduals 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 trans-
parency by requiring the assistance of an inter-
mediary 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. 
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(15) Referring to the Federal withholding man-
date in his work Public Finance in Democratic Proc-
ess: Fiscal Institutions and Individual Choice, 1986 
Nobel Prize winning economist James Buchanan 
stated that ‘‘The individual who does not have pos-
session of income before paying it out cannot’’ sense 
‘‘the real cost of public services in a manner com-
parable to that experienced in a genuine act of 
outpayment.’’. 
(16) In CATO Institute study, Charlotte 
Twight has noted that ‘‘[W]ithholding is the para-
mount administrative mechanism enabling the Fed-
eral Government to collect, without significant pro-
test, sufficient private resources to fund a vastly ex-
panded welfare state.’’. 
(17) The Federal tax withholding mandate was 
listed by Human Events in 2005 as the fourth 
‘‘Most Harmful Government Program’’ and seventh 
‘‘Worst Tax Law’’ in 2006. 
(18) 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. 
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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 in-
crease the personal wealth of taxpayers by allowing 
for the personal collection of interest during the fis-
cal year on overpayments that are otherwise used by 
the Federal Government to partly avoid interest pay-
ments; 
(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 SECU-
RITY TAX WITHHOLDING MANDATE. 
(a) IN GENERAL.—The following provisions of the In-
ternal 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 rail-
road retirement tax from compensation). 
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