The Tax Man Cometh

With sidereal certainty, tax season dawns. Whether you are feeling the April fool and cursing our government, or dancing euphorically anticipating a larger-than-expected refund, this is an excellent time to give our tax system a moment of sober contemplation (assuming your return hasn't already driven you to drink).

Taxation is government’s lifeblood, the power which makes all others possible. Our Founders wanted federal revenue derived primarily from indirect taxes, those on commerce, trade and sales. A government funded by indirect taxes is limited in size, for if rates are raised excessively, people avoid them legally by curbing expenditures, and revenue declines.

As direct taxes like the income tax are levied against individuals’ assets, they can only be avoided through criminality. History taught our framers that governments always abuse the power to directly tax citizens, and some Constitutional Convention delegates wanted to outlaw it. Others worried indirect taxation would provide insufficient revenue during emergencies like war, and felt America might perish for lack of funding. The problem was finding a way to grant the federal government direct taxation power only in times of emergency.

The solution was apportionment among the states. Direct federal taxes would be levied against states, never individuals, and each state would pay an amount proportional to its population. The founders knew individuals are often powerless against a government, but states with militias were definitely in a position to check federal encroachments, refusing frivolous or unconstitutional revenue requests.

Apportioned direct taxes were one-time affairs rather than perpetual income streams, so if the federal government needed additional emergency funds, it had to ask the states again. This is an important difference between America’s original tax system and our current one. Under the Founders’ system, the federal government determined the revenue required from direct taxation and asked states for it; in our modern system, the government takes as much as it can from individuals and then determines how to spend it.

America’s original tax system is one of the loftiest structures human wisdom ever erected, and Washington, Jefferson and Franklin agreed with its methodology and intent. They would oppose the 16th amendment which gave the federal government the power to tax individuals directly, and consider the IRS and income tax the exact tyrannies they tried to avoid when designing America.

If government raised tax rates 25% overnight most Americans would be less than amused, and our Founding Fathers were no different. As they paid a total rate of 6 - 9% outside of wartime, our modern levels would be a most disturbing discovery. If our Founders had submitted to the Townshend, Sugar, Stamp and Tea taxes which precipitated the American Revolution, and chosen not to revolt, they would still have paid far lower tax rates than we do. In Tempus Fugit, this realization causes a heartbroken Jefferson to remark, “It would have been better to accept the bad government offered us from beyond the water without the expense and risk of contest.”

Most Americans have never known anything except an IRS which levies double-digit direct taxes, and therefore don’t realize a different revenue system is truly viable. Our Founders would have a radically different view. Like most colonial Americans, they refused to tolerate high taxes, and were willing to take up arms to preserve their liberty. Which begs a question: Would George Washington, Thomas Jefferson, and Benjamin Franklin pay a federal income tax they consider tyrannical, or revolt again?

Welcome to The Junto!

Junto - Prelude to President’s Day

Junto - Cheney the Marksman

Junto - Caveat Emptor: The Abramoff Scandal

Junto - The Tax Man Cometh

Junto - For A Few Casualties More: Memorial Day

Junto - Is The Melting Pot Boiling Over?

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