People Knew What to do About (High) Taxes in the Good Old Days
Early American history was a conservative’s nirvana: It was one long tax revolt.
The British imposed taxes on everything from molasses to tea, and Americans smuggled the molasses, tossed the tea into a harbor and reached for their muskets. Thomas Jefferson’s incendiary Declaration of Independence listed King George III’s basest transgressions; prominent among them was that he had “sent hither swarms of Officers to harass our people and eat out their substance.” The descendants of those royal minions are now, of course, nestled in thousands of cubicles in Internal Revenue Service offices across the country.
Looking at that history, it’s astonishing how low the taxes were. Talk about men being men. One historian estimated the combined burden of the infamous “Navigation Acts,” for example, to be 1 percent of income. The other assorted taxes added up to about the same, making the total bite a measly 2 percent.
And that set off a war.
Hassett makes some good points in the rest of the article. Take a look at this graph and then read the explanation at the WaPo.
Government thus takes more from the wealthy through income taxes, but extracts more from the poor with all the other taxes. By doing this, politicians get to pretend that they are virtuously redistributing wealth from the richer to the poorer, and they can maintain that fiction without sacrificing the cash. Voters seem to like this approach.
9 Responses to “People Knew What to do About (High) Taxes in the Good Old Days”
“Government thus takes more from the wealthy through income taxes, but extracts more from the poor with all the other taxes.”
I’ve been saying this for years but it feels like no one to the right of Noam Chompsky would believe me.
Thanks goodness Kevin Hassett wrote this piece and thank you Michael for pointing it out.
The colonists didn’t revolt because of tax burden per se, they revolted because of taxation without representation.
Anyway I generally agree with the article and think we’re on the cusp of a progressive/conservative alliance to reform the tax code just to get rid of its insane complexities.
The bigger problem is that income taxes have lots of problems (including discouraging saving and reducing freedom to change behaviors) but consumption taxes are regressive. Personally I feel the best solution is to go towards consumption taxes and work towards having better social institutions where people can share resources and spend less money than they do now (course I feel that these instiutions should be capitalist in nature.)
I know only one sure thing about our system of taxes: I don’t understand it. Charts and graphs are of little help, because they are so elusive about methodology.
Regarding this chart:
-Are these taxes that were actually paid or are they what should have been paid according to the tax code? Have loopholes been taken into consideration?
-I take it that all income has been thrown into one pot, salaries and investment income alike?
I have questions about that for which, again, I can’t find reasonable answers.
I understand well how bits of data can be lumped to achieve a picture of the whole that is pleasing to the analyst. What we really need is an agnostic, one who can explain and reconcile how these conflicting charts and graphs are constructed.
Maybe they don’t take loop holes into account? Sitting right on the cusp of one of those charts I can say tax rate is lower, savings rate is much higher and food/medical/clothes notably lower. Then again, that is just my family.
My suggestion for tax reform is a progressive flat tax. Simply put, the idea is that the first 15k (or so) you make is free, after that 20% (or whatever number makes this work) across the board. No exceptions… Not for churches, not for interest on a home, not for charity. Yeah I know fat chance eh?
One problem with this is that it removes the govts ability to influence choices such as provided incentive for alternate fuel vehicles, or relief such a child credit. On the plus side is it removes the govts ability to meddle and give favors…
Why his over consumptive taxes? Because so much of our economy is fueled by purchasing that I am not sure the transition period would not cause some real headache… Plus, I am thinking (and could be wrong) consumptive taxes would hit working class families the most. Depends what they covered though.
> consumption taxes are regressive.
So is life. This actually is a non-issue. Meanwhile, progressive taxation is morally defective (though adherents of tax “fairness” dishonestly turn this completely around or upside down). Should everything else, not only taxes, be priced according to ability to pay? If you make more money than someone else, you “should” have to pay more than him or her for a house, for a car, for a pack of chewing gum. That’s “fair,” after all, because you have a greater ability to pay. So pay a greater, “fair” share.
> Personally I feel the best solution is to go
> towards consumption taxes and work towards
> having better social institutions
It depends on what you mean by “better,” but yes, consumption taxes, as opposed to income or wealth taxes (particularly progressive taxation, which is morally defective).
NOTE: Sane people do *** NOT *** want a consumption tax in the form of a personal expenditure tax (which is even more intrusive as well as more complicated than any income tax).
Many lefties would like to see taxes on motor vehicle fuels, but they’d be the first and loudest to complain (“Big Oil!”) once the taxes actually were put into effect. As it is, new, large motor vehicle fuel taxes (a huge revenue raiser) are probably going to be imposed in the next 10-20 years to address the coming disaster with Social Security and Medicare (or to provide Medicare for all).
> My suggestion for tax reform is a progressive flat tax.
“Flat” income taxes mean one (1) rate. Progressive taxes are normally defined as having multiple rates that increase with taxable income. But, your reform of income tax is splendid:
> the first 15k (or so) you make is free,
Minimum wage — poverty level (could adjust for family size)
> after that 20% (or whatever number
> makes this work) across the board.
Revenue neutrality is never a requirement. It only is useful as a valid approximation of what would be needed for minimum disruption of current government.
> No exceptions…
Could adjust for dependents (children are future taxpayers, after all). Certainly not for marital status, no deductions (which means not even medical expenses, a biggie that many would like to see fully deductable and which might be an extra issue to press in Washington currently).
What about retirement savings plans? We need more, not less, personal savings to provide for future consumption.
> One problem with this is that it
> removes the govts ability to influence
> choices
That is *** NOT *** a problem. That is a *** GOOD *** thing, because government should *** NOT *** be able to “influence choices” or engage in any other kind of social engineering! Correct, ideal government policy (in taxation and everything else) is 100% neutrality. (Better than that is the smallest, as well as cheapest, government possible.)
Incidentally, Dave[ ]A,
> the first 15k (or so) you make is free,
> after that 20% (or whatever number
> makes this work) across the board.
I realize the effect of this is (diminishing-marginal-rate) progressivity given that the greater the income, the more tax paid.
A single, logical, basic-cost-of-living exemption (possibly adjusted for number of dependents) and a single rate on all other tax, as you describe above, is the normal income tax that normal people have long demanded. Yes, with no deductions. (There might be a call to have medical expenses fully deductible.)
That is what normal people have long, long wanted — a sane income tax if we’re going to be stuck with an income tax.
All that matters is setting the exemption level and the tax rate. For revenue neutrality, a higher exemption requires a higher rate on all other income (which is what the Left would seek) while lowering the exemption to the minimum practical broadens the tax base and enables the rate to be minimized (which is what the Right would seek). It’s just a matter of coming to an agreement of the combination of the exemption level and the rate.
By the way, if it were a true income tax, that would mean rents, royalties, dividends, OPTIONS GRANTS AND REPRICINGS FOR BUSINESS EXECUTIVES, realized capital gains (including from the sales of homes), etc., would be taxable. “Income is income, from whatever source derived.” (Dividends would be fully deductible by businesses, the same as salaries and options grants, etc., as ordinary expenditures.) Note that estate inheritances would not be taxed as income (nor should they be, because the earlier owner was already subject to taxation and inheritance is merely a transfer of ownership.) This is not to say that (yeech) there would not be separate estate taxes, still. There might be (especially to help pay for Social Security and Medicare in the decades to come — anywhere the money can be found, Washington will take it, including probably Roth IRAs someday.)
One buck from a million people is a million bucks. Capitalists know this because they exploit it every day. Government provides infrastructure and opportunity with tax money. Capitalists want restricted opportunity because it gives them more control for cleaning yet another “buck” from the masses that otherwise might educate a poor person. If you graph times of our resulting greatest prosperity, you will see high taxes before and during, with recession as soon as they are cut.
Answer, no one making under a hundred thousand dollars a year should ever pay taxes with the balance laid upon those making more. Oh, and registered republicans pay double.
Uh, no. The amount one pays for something should be based on how much one needs and uses it. This is why taxes are higher for the rich. The rich have a greater need for infrastructure, security, stability, and all that other stuff that government provides. If you’ve got nothin’, you’ve got nothin’ to lose.
How can private property exist? It only exists because there is a government charged with protecting it and ensuring that what is yours stays yours, and that if there are any disputes, they are peacefully settled in the courts. Else, we devolve into a Lockeian “State of Nature” where the guy with the most guns wins. Since the rich have far more to gain from this system than the poor do, it is only fitting that they kick in a greater share.
> > Should everything else,
> > not only taxes, be priced
> > according to ability to pay?
> Uh, no.
Yes, if you want to be consistent and logical.
> The amount one pays for something should be
> based on how much one needs and uses it.
Welfare and other forms of assistance? Okay. We know how well that would go over with welfare recipients.
As to your claim:
> Since the rich have far more
> to gain from this system than
> the poor do, it is only fitting
> that they kick in a greater share.
“This system” is not primarily responsible for why some are rich (or have high incomes) and others are poor (or have low incomes). We are at equal liberty (if not of equal ability) to enjoy the system we have developed.
The only argument for ability-to-pay is utility, and you would have been on firmer (though still soft) ground had you instead chosen the older line that it hurts the rich less to pay taxes (out of incomes that not only are larger, but which have larger discretionary fractions) than it does the poor. Utility is the basis for the reasonable demand nearly all make that a certain basic or essential fraction of income be exempt from taxation, and that this apply equally to all.