Paul L. Caron

Friday, March 22, 2019

Thomas Presents The Modern Case For Withholding Today At Florida

Thomas (2017)Kathleen Delaney Thomas (North Carolina) presents The Modern Case for Withholding, 53 U.C. Davis L. Rev. ___ (2019), at Florida today as part of its Tax Colloquium Series:

Who is responsible for paying taxes to the government? Currently, the answer depends on one’s employment status. Employees enjoy the luxury of not having to think about tax remittance during the year because their employers withhold taxes from their paychecks. Non-employees, on the other hand, face a much more onerous system. They must keep track of and budget for taxes during the year, make quarterly remittances to the IRS, and may face penalties for failing to do so. Although this regime has been in place for many decades, there are several reasons why reform may be in order.  

First, the independent contractor workforce is expanding, propelled in large part by the growth of the gig economy. This means an increasing number of taxpayers are earning income outside of employment that is not captured by withholding. Second, the rise of the Internet and other advances in technology has made withholding by third parties more efficient and less costly than was historically the case. Finally, advances in the social sciences have shed new light on why many taxpayers appear to prefer withholding and why it may serve to enhance overall welfare. 

Accordingly, this Article proposes an expanded withholding regime that would condition withholding on the income of the payer, rather than on the employment relationship. Under such a regime, any business of a certain size paying more than a de minimis number of workers would be required to withhold taxes. To address cases where withholding would not be feasible, this Article also introduces the concept of “quasi-withholding.” Quasi-withholding would interject a private third party between the taxpayer and the IRS to facilitate tax payments and replicate the benefits associated with withholding. The third party could be a financial institution or a private business formed specifically to assist with tax remittance. Expanding withholding would vastly simplify the tax system for taxpayers, while enhancing revenue collection for the government, presenting a rare “win-win” opportunity for tax reform.

Colloquia, Scholarship, Tax | Permalink


The most compelling case for withholding is the tax evasion practiced by those whose taxes are not withheld--evasion that costs the Treasury roughly $400 billion a year, year after year. Strangely (to this writer at least) the author totally ignores this super-relevant fact.

I did notice that the article was labelled "Draft - comments welcome". I hope this one is. Here's some of the information that might be included in the final paper:

Posted by: Gerald Scorse | Mar 22, 2019 1:48:02 PM

The good thing about withholding is that it mitigates the pain of paying income tax. The bad thing about withholding is that it mitigates the pain of paying income tax.
Arguably there would be more pressure on Congress to control spending if everyone had to write one big check every April 15th (or whatever day returns are due).

Posted by: ruralcounsel | Mar 25, 2019 4:29:23 AM