The Associated Press tells us that there is a "dirty little secret that most Americans don't want to hear: We're under taxed." AP argues that Americans are under taxed because federal income taxes are less than 18 percent of gross domestic product (the historic average).
So are you under taxed?
Your answer may depend upon whether you are one of the 50 percent who pays federal income tax, or the other 50 percent who doesn't. Of course, it is entirely possible that you believe that only your neighbor should be paying more.
But I would argue whether you are under taxed really depends on what you demand of Washington.
Very few Americans today realize that from 1787 up until the Civil War in 1861, no American paid any federal income tax. In those days, the federal government paid its way with imposts and excises taxes. At least after 1816, if a British manufacturer wanted to sell his manufactured goods in the U. S., he had to pay a duty or an import tax to get them in. Somebody who turned corn into liquor for sale to his fellow Americans, had to pay an excise tax.
The income tax is what is know as a direct tax. A direct tax is a tax on individuals or their property. A direct tax is the opposite of a requisition. Under the Articles of Confederation, Congress had no power to levy a direct tax. The articles limited Congress to making "requisitions" upon the state governments. Then it was up to the states to levy the tax for the federal government -- which they often failed to do.
This "defect" in the articles, was one major reason why the Founding Fathers created our present Constitution.
But our Founding Fathers were not fools. They gave Congress the power to levy direct taxes, but out of fear that a majority might abuse that power to tax the minority for the majority's benefit, they required that direct taxes had to be in "proportion to the census."
During the Civil War, the courts looked the "other way" when Congress passed a federal income tax to finance the war. But when Congress reinstated the federal income tax after the Civil War, the U.S. Supreme Court struck it down as a "direct tax" not in "proportion to the census."
It was not until 1913, that the 16th Amendment was passed that Congress was given power to collect taxes on incomes from whatever source, without apportionment among the several states.
The point is this: There were many generations of Americans who would have disagreed when the AP claims we're under taxed, and that we should pay more federal income tax. Equally inane is the AP contention that unless the income tax is at least 18 percent of gross domestic product, (the historic average) that we are under taxed.
The difference between Americans of today, and Americans of the period before the Civil War, is this: Americans of today want governmental services and subsidies.
In ante-bellum America, there was sharp disagreement between the New England states and the Western states over whether it was even constitutional to use public revenues to finance public improvements, such as a "national road."
The Erie Canal was built with state, and not federal money. And there was near violent disagreement between the manufacturing states of the North, and the agricultural South over the tariff.
The manufacturers of the North wanted protection against cheap foreign manufacturers. The South wanted to buy imported goods without paying a tax to do so.
In pre-Civil War America, the federal government didn't need to tax the American people at least 18 percent of the gross domestic product because it wasn't in the business of providing all the subsidies and services to the American people that modern Americans demand.
Have you ever heard of the Catalog of Federal Domestic Assistance (CFDA)? According to the General Services Administration, which publishes the catalog, the CFDA is a compendium of federal programs, projects, services, and activities that provide assistance or benefits to the American public. It contains financial and nonfinancial assistance programs administered by departments and establishments of the Federal government.
The catalog provides a full listing or all 2,135 federal assistance programs that you fund when you pay your federal taxes, as well as detailed descriptions of those 2,135 programs. According to the CFDA, your tax dollars go to fund programs o :
-- State and local governments;
-- Federally-recognized Indian tribal governments;
-- Territories (and possessions) of the United States;
-- Domestic public, quasi-public organizations;
-- Private profit and nonprofit organizations;
-- Specialized groups; and individuals.
According to the CFDA's May 2 update, when you pay federal taxes you are supporting 427 subsidy programs of the Department of Health and Human Services, as well as a plethora of subsidy programs controlled by other agencies, including, 231 subsidy programs of the Department of Agriculture, 220 of the Department of the Interior, 170 of the Department of Education, and 125 out of the Department of Justice.
There was a time when Americans did not have 2,135 federal assistance programs.
If you want 2,135 such programs, then the AP may be right. You deserve to pay higher taxes. There is no free lunch.
Posted Online: May 20, 2011, 2:34 pm - Quad-Cities Online.com
By John Donald O'Shea
Copyright 2011
John Donald O'Shea
No comments:
Post a Comment