Wednesday, September 29, 2010

Taxes, etc.

What did the founders think about the income tax?

The present debate about tax policy is dizzying. It's not that the answer is difficult. Anyone enrolled in econ. 101 will know that raising taxes (even/especially on the job creators, i.e., the "rich") in the economy that we're in is a toxic pill. It's the accretions in the form of rehashed talking points that have been heaped onto the discussion that make the debate so much more tedious.

Dr. William Luckey gets to the bottom line and the fundamental question regarding income taxes in this fine piece, appearing on his blog:
For the sake of the conservatives, let us return to principle. The original Constitution explicitly prohibited “capitation” taxes, that is, taxes on people (caput is Latin for head). There were not supposed to be any income taxes, and all government revenue would come from the states apportioned by population. The states had to raise the money, which means that they had to hear the complaints about high taxes. Since the senators were appointed by the state legislators, the states had a direct line into Congress. If the tax bill given to the state was too high, the senators would vote against it. Note how this would strictly limit the spending of the government. It could not reach into your pocket and just take the money it wanted for whatever project it wanted, or to “regulate the economy.” ...

The principle that liberals and conservatives miss is not the pragmatic one about whether we should raise taxes during a recession, or how to close the budget gap, or should we punish the rich for their success. The principle is, “Does government have the right to tell you what to do with your income?” The founders would say, “NO.” Things like sales taxes or tariffs, aside from their economic inadvisability, are voluntary, because you can decide not to buy the product or service. Income tax is not voluntary. To test this theory, just don’t pay your taxes and see what happens.

Do we hear anyone on the political stage even approaching this argument?

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