Book Review: The Greedy Hand

Shlaes, Amity. The Greedy Hand: How taxes Drive Americans Crazy and What to Do About It. (1999, Kindle e-book)

Death and taxes. Depending on one’s personal philosophy, one can be pretty certain where death came from. But what about the various federal taxes that US citizens pay? Amity Shlaes’ short history of the various major individual income taxes is an intriguing look at the history and philosophy behind the taxes, and the problems with them. Although it is now twenty one years old, the book still rings true.

Shlaes was on the editorial board of the Wall Street Journal  when she wrote this small book, and so was very familiar with the financial world at the time. I suspect this also opened some doors for her, although she wrote the book on her own, not for the newspaper.

Shlaes begins with the social security tax, the product of the New Deal. I was familiar with some of the story, but not that the first person to get monthly payments from Social Security got at least ten times what she had paid in. In fiction writing we call that foreshadowing, in non-fiction a precursor. Also, the life expectancy on average was 56, and payments started at 65. We know how that ended up. She also points out that we who pay the tax see only half of the actual bill (12.5% of one’s income). From there she moves to withholding, another trick used to conceal the bite taken from the paychecks of wage workers.

As the author works through the various bites taken from earnings (and inheritances) and how they affect people, she makes the important point that the system favors wage workers over independent contractors and the self-employed. It is much easier to deal with all the forms and paperwork when someone else does the withholding and so on, rather than doing quarterly up-front payments. The forms are far less complicated, too. One chapter is about the tax preparation industry, and how their role has expanded along with the tax code.

This isn’t a book to read if you are already in a bad mood, or on April 10th. 🙂 However, it is a very, very readable and good account of just how all the taxes that we US wage earners (and Social Security recipients) pay. If you know a young person who is going to be entering the work force soon, you might loan them a copy of this book, so they can see what a bite the feds take. And how poorly income, estate, and Social Security taxes [income tax charged on retirees who “make too much”] do the job they are supposed to. As tools for social engineering they do not accomplish the stated goals, nor do they bring in much revenue compared to what they were/are supposed to.

For most of us, this is not new, but the history and details are. Some things Shlaes describes have changed with various tax code revisions, and her comment about American prosperity will no doubt draw sour thoughts. However, the rest of the book remains a very useful overview of the individual income tax system.

FTC Disclaimer: I purchased this book with my own money for my own use and received no remuneration from the author or publisher for this review.

22 thoughts on “Book Review: The Greedy Hand

            • *gets the giggles*

              It’s a little complicated… we got hooked on the cheapest coffee at the Exchange, which I honest to goodness bought because the standard blend is in a bright yellow tin that says “GROUND COFFEE” across the front. The dark roast is in an identical but gray instead of yellow can.
              And it’s good. (Well, suits our tastes, I should say– coffee is so subjective.)

              So I direct order six packs of coffee tins for about twice what it cost on base, but still about the price of Folger’s non-fancy containers. (And I get the tins!)

            • Oh, gads, the guy who mentions he always buys a bunch when he hits base– that was us, visiting my husband’s grandma! She gave me SUCH a look at buying ten cans of cheap coffee…..

          • Looking at coffee web site.

            Chase & Sanborn is still around? I’d only heard of it on vintage radio ads.

            And there is a nice simplicity to the Reveille label.

            FWIW, I’m a curious mix – in a hurry, I’ll use the Keurig (drawing prize at a $COMPANY Christmas party some years ago), but if I want smooth and *potent* I’ll fresh grind and use a French press. These are not exclusive – the former might be the initiator of the latter.

  1. I don’t use the tax preparation software, but have come to the conclusion that the people who write the worksheets are in collusion (*that* word again) with those who do. Tax on Social Security is a pain in the tail, not least because the worksheet forms go to great lengths to obscure just what each line item is supposed to mean. I build a spreadsheet to do it, and usually have to tweak it every so often. After a couple of howlers, I’ve learned to close the worksheet and recalculate it from the instructions. If they match, I assume I got it right. When they don’t, grumbles abound.

    The second “favorite” is the Alternative Minimum Tax. Go through the worksheet, and at the very end, it notes that if you earned less than XXX dollars, you don’t owe AMT. But, they have you do the calculations long before that. Thanks, people.

    And then there’s the Oregon income tax. We had years when we didn’t earn enough to bother with a federal tax return, but Oregon insists on seeing one. So, I’ve had to do the Fed return (and not file, if memory serves) *then* do the state. Grrrh.

    [End rant]

    I’m on my last cup of Hills Brothers for the morning. It’s usually on sale at Bi-Mart, and Folgers and I haven’t gotten along for over 50 years.

  2. Tax collectors have traditionally been hated. The Federal government has managed to dodge this by farming out the effective collection of taxes to employers. As you observe, if you’re self-employed, you feel the burden more directly and more heavily.

  3. Amity Schlaes is a Valuable Historian who flies straight against the narrative, on wings of primary sources. I kinda wonder how she gets away with it. But it seems lucrative!

  4. If you live in a high-tax state, and your family has enough income to live in a nice part of that state, and you write as a hobby, your marginal tax rate on your writing can easily exceed 65% (federal income tax ~30%, self-employment tax ~15%, state income tax ~10%, sales tax ~10%). Or in other words, you get to keep about 1/3 of every dollar you earn from writing, and the rest goes to various governments. Which is why I gave it up, at least until we move to a low-tax state. Doing favors for friends (aka the barter economy) is a better use of my time.

    The alert reader will observe that the barter economy does not scale. Implications of this set of facts, with respect to national economic growth and prosperity, are left as an exercise for alert readers.

    • So, if I ever am suddenly taken up with the idea that I can write, or whatever else, good enough to be more than hobby, the first step in making it worth(my)while is leaving Minnesota and heading to someplace like Texas.

  5. Aargh! I’ve been self emloyed/contract worker (both, because I do multiple things for a living) not a wage earner for a number of years. Withholding taxes from the paycheck so your average wage earner never sees the money has been one of the biggest deceptions government has pulled on American citizens. Most people who work for a paycheck cannot comprehend how much money they pay the government each year. If they had to write a check for their taxes at the end of the year they would demand an accounting.

    • A large percentage of the “people who work for a paycheck” effectively don’t pay any federal taxes. No, not even FICA (Social Security and Medicaid). I won’t hazard a guess as to just how big that percentage is, but I worked as a tax preparer for H&R Block this year and I saw a lot of people with low incomes get a refund of all income tax withheld plus several thousand dollars more – more than enough to counterbalance their FICA withholdings. Basically, if you earn less than about thirty grand a year and you have one or more dependent kids, the IRS pays you at tax time.

  6. I grew up doing my own tax reporting because my parents did. My dad worked in Ag so he was able to have his employer skip the withholding, even if they still had to collect the FICA. 1950s thru 1980s. They’ve split out the Medicare since then.
    When my father applied for SSI, they said that the FICA for one year has not been collected. He responded with “Yes, they were collected”, and pulled out a W-2 he had received for every year he had been employed (35 yrs with same employer) and every 1040 that he had paid any FICA on. The real kicker was that the year in question was printed on thermal paper. The Central San Joaquin Valley gets very hot in the summer, and if course the attic was even hotter. You could not read a thing in that W-2. They gave in though. I don’t think they weren’t prepared for him to bring all of them in.
    They also had their own farm and other businesses so they were well acquainted with SE reporting. The only difference is that Ag doesn’t get penalized if they underreport on the Quarterlies. As far as I know this is still true. When the majority of your income comes in in a 2 mo period you can do that.
    My mom was the main bookkeeper for them and she subscribed to the ‘Bigger Shoebox’ Theory: Keep _every_ receipt. DO NOT list any expense. asset purchase, per-unit retain charge and income, or miles driven in business use that you can’t back up with a report or receipt. This got them through 4 IRS audits in a decade.
    Imagine if you will the auditing agent sitting down at our dining table and asking to see the records for 1983. My dad says “Just a minute, I’ll get them down”, goes to the attic access, climbs up, gets the correct Sunkist shipping box, comes back to the dining room with a box labelled 1983, and pulls off the lid. There in the box are nearly labelled file folders – Jan thru Dec (12), Farm, Race horses, Amway, Airplanes, and Personal. Three folders marked Farm acct., Airplanes acct, and Personal acct have every cancelled check in them. In there is every piece of paper that backs up every number on their 1040, Sch A, C, D, F, 1099s, S Corp, and Depreciation forms for every tree, horse, airplane, tractor, and large implement. I think I saw his eyes bulge.
    Dad taught us to not overwithhold. He didn’t like to give the govt a free loan and didn’t think we needed to, either.
    I have only had my taxes done by someone else once and I am still sure I got cheated.

    • When I was flying in the Midwest, one of the other pilots (a farmer) got audited. When the fourth box appeared, the guy started to whimper. (Pilot, his wife’s day-care, their farm, her father’s farm that they worked.)

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