There is little I can add to this article since I do support the FairTax, however I also comprehend that it isn't a perfect solution. I want to see change in the current system with something better than what we have, the FairTax is better then we we have now, not perfect but much more desirable.
The Washington Times
www.washingtontimes.com
The test on tax reform
By Richard W. Rahn
Published April 13, 2007
If politicians tell you they favor "tax reform" and "tax simplification," what do you think they mean? The fact is most politicians, including the current presidential candidates, say they will give us tax reform and simplification, but what they mean differs widely.
Each candidate will strive to try to define those words in such a way that will attract more voters than they repel, and some will be sincere (like President Reagan), and some will be less sincere (like the first President Bush and President Clinton). The test for the voters is to determine who is sincere and who is not; the test for the candidates (at least the sincere ones) is to come up with a plan that is real reform and simplification and one that will also attract a majority of the voters.
As is well known, the current U.S. income tax system and the Internal Revenue Service are a huge and unnecessary drag on both the economy and individual liberty. The IRS code and regulations have become hopelessly complex and grown to about 7 million words. No one can possibly understand the present code, including even those at the IRS. Thus no matter how well-meaning, the taxpayer is always at risk for noncompliance -- such laws are characteristics of totalitarian, not free, societies.
Compliance costs are conservatively estimated at more than $350 billion, and 5.8 billion man-hours, which represent a work force of 2.5 million, larger than the populations of Dallas and Detroit combined. The system taxes savings and investment -- the seed corn of the economy -- multiple times, and is so riddled with special provisions it is grossly unfair.
Responsible presidential candidates will say (and actually mean) that the present tax code and system must be scrapped. The system is beyond repair and can only become more police-state-like intrusive and economically destructive as the people find ways around it and the authorities engage in a losing war to stop them. Again last week, the IRS reported for the umpteenth time its loss of hundreds of computers with confidential data.
Fortunately, serious tax lawyers and economists have developed alternative proposals for true tax reform. Constructive reform means:
* Increasing fairness by taxing all people at the same low maximum rate while ensuring low-income people, through tax credits or a tax rebate, pay little or no tax.
* Making sure income is only taxed once so people are not taxed again on their productive savings and investment, a serious impediment to economic growth.
* And greatly simplifying the tax code by either not requiring reporting or making it so simple and straightforward it can be reported on a postcard. Two alternative serious proposals, with substantial political constituencies, meet those criteria: the "flat tax" and the national sales tax, better known as the "Fair Tax."
Under the flat tax, people only pay tax on their wages, salaries and pensions, and not on their interest, dividends, estate or capital gains. It is a single rate tax, but does provide for a standard exemption so low-income people, in effect, pay no tax or a much lower rate. The IRS only needs to know how much a household has received in wages, salaries and pensions, and no other information.
Under the Fair Tax, people are only taxed on their purchases of final products. The government would give all legal residents a grant to offset the tax they have paid on purchases up to a specified amount, so again, low-income people would pay no or little tax. The tax would be administered by state sales tax authorities, and the IRS would neither need to know nor have any information about individual taxpayers.
Though it would be desirable to abolish the 16th Amendment to the Constitution (the income tax amendment), it is not absolutely necessary for either the flat or Fair Tax. Were the IRS prohibited from collecting information about individuals' incomes or assets and also were forced to destroy old files, it would be very difficult to reinstall an income tax system without politically unacceptable cost and privacy invasions.
Candidates for president who are serious about fundamental tax reform would be well advised to endorse either, or both, the Fair Tax or flat tax, because each alternative can raise as much money as the current system and would be a vast improvement in terms of economic growth, fairness and personal liberty.
Both proposals are doable, and both have very large numbers of responsible citizens supporting them. From a practical political standpoint, as well as economic soundness, a candidate would make a serious mistake by saying he or she would not sign them into law, if either made it to the president's desk.
Economists, like yours truly, will grade the various candidates' tax reform proposals in the coming months. It will be interesting to see who passes and who doesn't.
Richard W. Rahn is chairman of the Institute for Global Economic Growth.
Friday, April 13, 2007
Governor signs bill on keeping guns in emergencies
It must be Friday the 13th, since our governer signed a bill which requires government entities NOT to confiscate legally owned firearms in a residence or business in a State of Emergency.
Apr 13, 12:33 PM EDT
Governor signs bill on keeping guns in emergencies
JEFFERSON CITY, Mo. (AP) -- Gov. Matt Blunt has signed legislation ensuring that Missouri residents could not have their guns taken away during an emergency.
The legislation spells out that no government or individual can decide in an emergency to take away guns and ammunition from those who lawfully possess them.
The House passed the measure Thursday on a 150-2 vote. The Senate also passed the bill overwhelmingly in mid-March. Blunt signed the measure later Thursday, his office said, but also planned a ceremonial signing Friday in St. Louis during the National Rifle Association's annual convention.
The bill is a response to the fallout after Hurricane Katrina in New Orleans in August 2005.
"Family heirlooms were taken away, and after this state of emergency is over, there is no accountability, there is no tracking and no one knows who they belong to," said Rep. David Pearce, R-Warrensburg.
State and federal law enforcement officers in Louisiana confiscated hundreds of guns after the levees failed and the city began to flood. Several pro-gun groups sued, and the city last spring began returning weapons to owners with paperwork for them.
After the hurricane, gun-rights groups have embarked on nationwide efforts to prevent the seizure of guns during emergencies.
The legislation contains no penalty for taking firearms during an emergency, but supporters say that the threat of litigation would be enough to keep police and government officials in line.
Rep. Michael Daus said he was concerned that bill could make it harder for police to do their jobs during an emergency. Daus, D-St. Louis, said he thinks it is likely people's possessions will be at least damaged by an emergency, making it difficult to determine whether a weapon is owned lawfully. He predicted the confusion could cause problems.
---
Gun seizure bill is SB257.
On the Net:
Legislature: http://www.moga.mo.gov
© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.
Apr 13, 12:33 PM EDT
Governor signs bill on keeping guns in emergencies
JEFFERSON CITY, Mo. (AP) -- Gov. Matt Blunt has signed legislation ensuring that Missouri residents could not have their guns taken away during an emergency.
The legislation spells out that no government or individual can decide in an emergency to take away guns and ammunition from those who lawfully possess them.
The House passed the measure Thursday on a 150-2 vote. The Senate also passed the bill overwhelmingly in mid-March. Blunt signed the measure later Thursday, his office said, but also planned a ceremonial signing Friday in St. Louis during the National Rifle Association's annual convention.
The bill is a response to the fallout after Hurricane Katrina in New Orleans in August 2005.
"Family heirlooms were taken away, and after this state of emergency is over, there is no accountability, there is no tracking and no one knows who they belong to," said Rep. David Pearce, R-Warrensburg.
State and federal law enforcement officers in Louisiana confiscated hundreds of guns after the levees failed and the city began to flood. Several pro-gun groups sued, and the city last spring began returning weapons to owners with paperwork for them.
After the hurricane, gun-rights groups have embarked on nationwide efforts to prevent the seizure of guns during emergencies.
The legislation contains no penalty for taking firearms during an emergency, but supporters say that the threat of litigation would be enough to keep police and government officials in line.
Rep. Michael Daus said he was concerned that bill could make it harder for police to do their jobs during an emergency. Daus, D-St. Louis, said he thinks it is likely people's possessions will be at least damaged by an emergency, making it difficult to determine whether a weapon is owned lawfully. He predicted the confusion could cause problems.
---
Gun seizure bill is SB257.
On the Net:
Legislature: http://www.moga.mo.gov
© 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.
The Dinner Tab (Tax 101 for Liberals)
Yes friends it is that time again, where government either says you didn't pay enough to support our out of control spending or where those less fortunate get to benefit off of the redistribution schemes instituted by the government so people will continue to vote for political clout.
The Dinner Tab (Tax 101 for Liberals)
Tuesday, February 27, 2007 3:12 PM
I often chuckle at the "tax cuts for the rich!", meme. A conversation with someone on the Left usually goes something like this:
"I'm opposed to those tax cuts," they say, "because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that's not fair."
And though you try to argue, "But the rich pay more in the first place, so it stands to reason that they'd get more money back", you can tell they are not really convinced. So I like to tell the parable that follows. Hopefully, it will break through the fog of emotion; and if it doesn't, it's still a pretty good story.
Let's put tax cuts in terms everyone can understand. Let's suppose that every evening 10 men go to a restaurant for dinner. The bill for all ten comes to $100. This bill is divided the same way our tax burden is divided, the first four men pay nothing; the fifth guy pays $1; the sixth guy chips in $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest 10%) would pick up $59.
The men all ate dinner in the restaurant every evening and all seemed quite happy with this arrangement until the restaurant owner threw a wrench in the works. "Since you are my best customers," he said, "From now on, I'm going to reduce your bill by $20. Now dinner for all 10 of you will only cost $80."
The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal.
The men call an accounting friend with this conundrum and he suggests that the most equitible plan would be to allocate the savings based on the proportions they were paying before the discount. He worked out the amounts each should pay based on that assumption with the following results: The first five now paid nothing; the sixth pays $2, the seventh $5, the eighth $9, the ninth $12, and the tenth man now would pay $52.
Outside the restaurant, the men began to compare their savings. "I only got a dollar out the $20," complained the sixth man, pointing to the tenth, "and he got $7!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. He (the tenth man) got seven times more than me!"
"That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men vented their outrage on the the tenth. He was so put off that he was no longer willing to have dinner with them anymore. So the next evening he didn't show up. The remaining nine sat down and ate without him. When the bill came, however, they discovered something very important. They were now $52 short!
And that, my friends (and you class warriors, too), is how America's tax system works. The people who pay the most tax will get the most benefit from a tax cut. Attacking them for being wealthy, and feeling put out by their success lifts no one. And if you are diligent enough in your contempt, they could just stop showing up at the table. There are lots of good restaurants in the Cayman Islands.
The Dinner Tab (Tax 101 for Liberals)
Tuesday, February 27, 2007 3:12 PM
I often chuckle at the "tax cuts for the rich!", meme. A conversation with someone on the Left usually goes something like this:
"I'm opposed to those tax cuts," they say, "because they benefit the rich. The rich get much more money back than ordinary taxpayers like you and me and that's not fair."
And though you try to argue, "But the rich pay more in the first place, so it stands to reason that they'd get more money back", you can tell they are not really convinced. So I like to tell the parable that follows. Hopefully, it will break through the fog of emotion; and if it doesn't, it's still a pretty good story.
Let's put tax cuts in terms everyone can understand. Let's suppose that every evening 10 men go to a restaurant for dinner. The bill for all ten comes to $100. This bill is divided the same way our tax burden is divided, the first four men pay nothing; the fifth guy pays $1; the sixth guy chips in $3; the seventh $7; the eighth $12; the ninth $18. The tenth man (the richest 10%) would pick up $59.
The men all ate dinner in the restaurant every evening and all seemed quite happy with this arrangement until the restaurant owner threw a wrench in the works. "Since you are my best customers," he said, "From now on, I'm going to reduce your bill by $20. Now dinner for all 10 of you will only cost $80."
The first four are unaffected. They still eat for free. Can you figure out how to divvy up the $20 savings among the remaining six so that everyone gets his fair share? The men realize that $20 divided by 6 is $3.33, but if they subtract that from everybody's share, then the fifth man and the sixth man would end up being paid to eat their meal.
The men call an accounting friend with this conundrum and he suggests that the most equitible plan would be to allocate the savings based on the proportions they were paying before the discount. He worked out the amounts each should pay based on that assumption with the following results: The first five now paid nothing; the sixth pays $2, the seventh $5, the eighth $9, the ninth $12, and the tenth man now would pay $52.
Outside the restaurant, the men began to compare their savings. "I only got a dollar out the $20," complained the sixth man, pointing to the tenth, "and he got $7!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. He (the tenth man) got seven times more than me!"
"That's true," shouted the seventh man. "Why should he get $7 back when I got only $2? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men vented their outrage on the the tenth. He was so put off that he was no longer willing to have dinner with them anymore. So the next evening he didn't show up. The remaining nine sat down and ate without him. When the bill came, however, they discovered something very important. They were now $52 short!
And that, my friends (and you class warriors, too), is how America's tax system works. The people who pay the most tax will get the most benefit from a tax cut. Attacking them for being wealthy, and feeling put out by their success lifts no one. And if you are diligent enough in your contempt, they could just stop showing up at the table. There are lots of good restaurants in the Cayman Islands.
Wednesday, April 11, 2007
Nixa smoking ban
I was driving into town today with the radio tuned to KADI 99.7(http://www.kadi.com/)when the perky female radio jockey lamented about the smoking ban in Nixa. This perky twenty something thought it to be a good idea that the government regulates PRIVATE businesses in the manner in which they conduct their business.
In case your wondering YES I did hollar at the dingy broad on why government/hence the popular vote of the people is quite a bad idea for the business sector. Just like with Don Imus sponsors and listeners will determine if he truly is a BIGOT or not. You'll notice I didn't use the word RACIST because Mr. Imus has never stated that his race is superior to that of any minority. It is quite interesting however that black rappers can call black women ho's whore's bitches and the like and not one complaint from Jesse Jackson or Al Sharpton. Sorry for the diversion back to my rant.
OK upon finding her picture on tha radio stations website I take back the twenty something comment (http://www.kadi.com/showdj.asp?DJID=29354). However this has become a typical response in the fight for property rights and HOW a private business has become known as a public area.
A restaurant owner has the right or should have the right to determine whether or not his/her establishment allows smoking. A simple sign posted by the front door that states this establishment ALLOWS smoking should be enough to warn non smokers of the conditions. If every restaurant allows smoking then someone should be thinking about making money by opening up a NON SMOKING restaurant. Become a capitolist and risk your own money on a business venture instead of sticking your opinions and regulations on people that haven't asked for it.
By the way I'm a non smoker !!!!!
In case your wondering YES I did hollar at the dingy broad on why government/hence the popular vote of the people is quite a bad idea for the business sector. Just like with Don Imus sponsors and listeners will determine if he truly is a BIGOT or not. You'll notice I didn't use the word RACIST because Mr. Imus has never stated that his race is superior to that of any minority. It is quite interesting however that black rappers can call black women ho's whore's bitches and the like and not one complaint from Jesse Jackson or Al Sharpton. Sorry for the diversion back to my rant.
OK upon finding her picture on tha radio stations website I take back the twenty something comment (http://www.kadi.com/showdj.asp?DJID=29354). However this has become a typical response in the fight for property rights and HOW a private business has become known as a public area.
A restaurant owner has the right or should have the right to determine whether or not his/her establishment allows smoking. A simple sign posted by the front door that states this establishment ALLOWS smoking should be enough to warn non smokers of the conditions. If every restaurant allows smoking then someone should be thinking about making money by opening up a NON SMOKING restaurant. Become a capitolist and risk your own money on a business venture instead of sticking your opinions and regulations on people that haven't asked for it.
By the way I'm a non smoker !!!!!
Tuesday, April 10, 2007
City council needs to ask debt questions
At the city council meeting the members took 30 minutes to pat themselves on the back for all the ways they are spending money in the downtown area. The mayor was aghast that the SNL actually questioned the decisions of the council to spend this money on various projects which haven't been finalized or even awarded.
I wonder if an impact study has been done to determine the fiscal impact of all the $$$ spent in the downtown area.
You want to revitalize the downtown area put a Super Wal-Mart down there and people will flock to it. The type of people that will visit the various shops in the newly renovated downtown area prodominately live in the San Francisco area or in Marin County CA. How are we going to get those people here Mayor Tom. The region of downtown has been populated by bars and the like which seem to entertain the MSU students and the crime rate of the area doesn't seem to reflect the major sources of entertainment in that area.
I see NO reason why PRIVATE monies can't be invested in the area. Once something is set in stone for the advancement of private money to be invested in this area then public monies could follow upon reasonable assurance that the taxpayers aren't going to be left holding an empty bank statement.
City council needs to ask debt questions
Springfield nears worrisome level.
Before they vote to put the city in debt by another $20 million tonight, city council members have to ask themselves two questions:
How much debt is the city actually in?
How much can the city handle?
What's worrisome is that council members didn't appear to ask those questions a couple of weeks ago before they approved the first reading of bills that would authorize the city to sell up to $2.7 million in bonds for a crime lab and up to $6 million for a Heer's parking garage and another $12 million for a parking garage at College Station.
We're pretty sure the council didn't ask the question because when we asked it of City Manager Bob Cumley, he didn't know the answer. But he found out, and the answer should give city taxpayers pause.
If the proposals before the council are approved tonight, the city will have just more than $61 million in debt related to economic development projects downtown. The city has other debts, such as about $90 million for the new airport terminal, and other bonds that are backed by taxes for road projects, but the downtown economic development debt is significant because it's a bit of a gamble.
If the projects work — and don't misunderstand us, we believe they will — then the debt can be paid off without much harm to general revenue. And if the projects fail? That's a possibility Cumley and others don't want to think about.
But they are thinking about the debt. And their conclusion, after tonight at least, is clear. No more debt.
"At some point, you start to get concerned," Cumley says.
We believe that point ought to be now.
We have been, and continue to be, fans of downtown's resurgence and the city's role in helping to make it happen. The crown jewels, so to speak, are the College Station project that is under construction and the Heer's building redevelopment that is getting closer by the day. We believe the very thought of those projects on the horizon is contributing to the work of other developers in and around downtown as more old buildings get refurbished and turned into loft apartments and retail outlets. The crime lab project is important in and of itself in that it will improve the entire state's ability to move justice forward in cases right now that are delayed because of the lack of a lab; but it's also valuable as it will bring employees downtown and offer even more incentive for redevelopment of older empty downtown buildings.
But fans of these projects or not, it's important to consider the short and long term repercussions of this debt. In the short term, some of the previous bonded indebtedness is costing the city out of general revenue coffers. According to figures provided by the city, it's costing about $500,000 a year to pay off bonds that build the Jordan Valley Ice Park and another $500,000 a year to pay off bonds for the Jordan Valley Parking Garage. Meanwhile, though not downtown, the city will spend more than a million dollars out of general revenue this year to pay off bonds for the Partnership Industrial Center near the airport.
That's $2 million a year that's being spent out of general revenue on a gamble that once completed, economic development projects will produce enough revenue to help pay off their own debt. One can argue that a strong downtown core is worth more economic development potential to the city even if it costs some general revenue to make it happen. But that's a tougher and tougher argument to make as a tight city budget leads to hiring freezes and questions about raises.
At some point, there has to be a payoff to this gamble.
So where is it? That's what council members need to ask themselves before they vote.
I wonder if an impact study has been done to determine the fiscal impact of all the $$$ spent in the downtown area.
You want to revitalize the downtown area put a Super Wal-Mart down there and people will flock to it. The type of people that will visit the various shops in the newly renovated downtown area prodominately live in the San Francisco area or in Marin County CA. How are we going to get those people here Mayor Tom. The region of downtown has been populated by bars and the like which seem to entertain the MSU students and the crime rate of the area doesn't seem to reflect the major sources of entertainment in that area.
I see NO reason why PRIVATE monies can't be invested in the area. Once something is set in stone for the advancement of private money to be invested in this area then public monies could follow upon reasonable assurance that the taxpayers aren't going to be left holding an empty bank statement.
City council needs to ask debt questions
Springfield nears worrisome level.
Before they vote to put the city in debt by another $20 million tonight, city council members have to ask themselves two questions:
How much debt is the city actually in?
How much can the city handle?
What's worrisome is that council members didn't appear to ask those questions a couple of weeks ago before they approved the first reading of bills that would authorize the city to sell up to $2.7 million in bonds for a crime lab and up to $6 million for a Heer's parking garage and another $12 million for a parking garage at College Station.
We're pretty sure the council didn't ask the question because when we asked it of City Manager Bob Cumley, he didn't know the answer. But he found out, and the answer should give city taxpayers pause.
If the proposals before the council are approved tonight, the city will have just more than $61 million in debt related to economic development projects downtown. The city has other debts, such as about $90 million for the new airport terminal, and other bonds that are backed by taxes for road projects, but the downtown economic development debt is significant because it's a bit of a gamble.
If the projects work — and don't misunderstand us, we believe they will — then the debt can be paid off without much harm to general revenue. And if the projects fail? That's a possibility Cumley and others don't want to think about.
But they are thinking about the debt. And their conclusion, after tonight at least, is clear. No more debt.
"At some point, you start to get concerned," Cumley says.
We believe that point ought to be now.
We have been, and continue to be, fans of downtown's resurgence and the city's role in helping to make it happen. The crown jewels, so to speak, are the College Station project that is under construction and the Heer's building redevelopment that is getting closer by the day. We believe the very thought of those projects on the horizon is contributing to the work of other developers in and around downtown as more old buildings get refurbished and turned into loft apartments and retail outlets. The crime lab project is important in and of itself in that it will improve the entire state's ability to move justice forward in cases right now that are delayed because of the lack of a lab; but it's also valuable as it will bring employees downtown and offer even more incentive for redevelopment of older empty downtown buildings.
But fans of these projects or not, it's important to consider the short and long term repercussions of this debt. In the short term, some of the previous bonded indebtedness is costing the city out of general revenue coffers. According to figures provided by the city, it's costing about $500,000 a year to pay off bonds that build the Jordan Valley Ice Park and another $500,000 a year to pay off bonds for the Jordan Valley Parking Garage. Meanwhile, though not downtown, the city will spend more than a million dollars out of general revenue this year to pay off bonds for the Partnership Industrial Center near the airport.
That's $2 million a year that's being spent out of general revenue on a gamble that once completed, economic development projects will produce enough revenue to help pay off their own debt. One can argue that a strong downtown core is worth more economic development potential to the city even if it costs some general revenue to make it happen. But that's a tougher and tougher argument to make as a tight city budget leads to hiring freezes and questions about raises.
At some point, there has to be a payoff to this gamble.
So where is it? That's what council members need to ask themselves before they vote.
Monday, April 9, 2007
Take Us Back to '13
that 50% + of the voting public decided not to fill out tax forms. Clearly we need a tax revolt
April 9, 2007 Edition > Section: Opinion >
Take Us Back to '13
BY LARRY SCHWEIKART - Mr. Schweikart, professor of history at the
University of Dayton, is author of "A Patriot's History of the United
States" and "The Entrepreneurial Adventure: A History of Business in the
United States."
April 9, 2007
URL: http://www.nysun.com/article/52085
Disclaimer: I hate taxes. I think I pay way too much in taxes. I
think my fellow Americans pay way too much in taxes, especially the
"rich." Perhaps some people aren't bothered that the top 5% of income
earners pay 53% of all income taxes, or that the top 10% pay 65%, but I
am.
Moreover, merely filing tax forms is a frustrating, difficult,
mistake-prone process. According to one recent study, only 13% of
Americans now prepare their own taxes, down significantly from 1993. The
cost of hiring someone to prepare a simple 1040 form can be as high as
$110, and studies have shown that preparation can consume up to 37.8
hours for the most basic return.
Why, then, do we have the system we have? How did it get to the
point that within a mere five years after being enacted, the lowest rate
had gone up by a factor of 25, and the lowest rates reached 75% of every
extra dollar earned? How did it get to the point that, prior to George
W. Bush's tax cuts, Americans worked until mid-May just to pay their
taxes?
Income taxes were sensibly prohibited in the Constitution. During the
Civil War, the Union secretary of the Treasury, Salmon Chase, briefly
implemented income taxes to help pay war bills, but they were
unsuccessful at raising funds. After the war, attempts to create an
income tax foundered when the U.S. Supreme Court ruled them
unconstitutional.
Without income taxes, throughout the 1800s, the primary source of paying
the government's bills came from import duties, and, secondarily, land
sales. By 1900, while federal lands were by no means vanishing, they
were providing steadily diminishing returns. The conservationist
movement, led by Teddy Roosevelt, argued for setting aside many of these
lands as national park and wilderness areas, further reducing income
that could be generated from sales.
Tariffs still paid exceptionally well at the turn of the century,
though, with virtually every imported product or raw material having a
duty.
The problem with tariffs was that Congress had to adjust the tariff
rates every few years. Even assuming that Congress was more efficient
and sensible at the turn of the century than today, can you imagine 400
or so legislators arguing over a tenth-of-a-cent increase in imported
hemp? Moreover, since before the Civil War, some
Americans—particularly those in the South—argued that tariffs merely
took money out of one group's pocket, the Southerners, and put it in the
pockets of another group, Northern businessmen.
So the first argument made to the public for adopting the income tax was
that it was fairer than tariffs and easier for Congress to administer.
Second, it originally was simple in design. The first income tax form,
which may be viewed at taxfoundation.org/blog/show/642. html, was one
page with six income brackets, beginning at $20,000. Anyone could fill
out the form.
Third, the original rates were stunningly low. From $20,000 to $50,000
the taxpayer paid 1%. Rates went up 1% in each of the brackets
thereafter, and the top bracket was 6% for those making over $500,000.
And there was a $3,000 personal deduction. To put these numbers in
perspective, a steak cost a quarter in 1920; a men's suit, $20; and a
Ford Model T under $600. In short, the vast majority of Americans would
never have paid any income taxes under that structure, and those who did
pay would barely feel it. There was no withholding, so potential
taxpayers had to save for tax day.
Those three factors — the complexity and political tension of the
tariff, the simplicity of the income tax, and the low rates — all made
the Income Tax Amendment an easy sell to the public. It might have
remained only a minor irritant if, over the years, rates had not
skyrocketed and legislators had not started using the tax code for
punishments and rewards, social engineering, and pet projects. Nor did
tariffs go away. Instead, Americans often got double-taxed.
Meanwhile, even after the tax cuts of the 1920s by the Treasury
secretary, Andrew Mellon, tax rates never fell back to their original
levels of 1913. "Tax creep" was common in both Democratic and Republican
administrations until, finally, rates would get so high that revenue
fell as people avoided taxes and reduced work. When a new, clear-eyed
politician would see that high rates were hurting government income, a
tax cut would follow, and the cycle would begin anew.
The income tax may have been "sold" to the public on the grounds of its
low rates and simplicity, but progressive advocates of the income tax
envisioned it exactly as it evolved — a tool of income transfer and
social engineering. It promised to, as one proponent claimed, "equalize
tax burdens borne by the various classes … [and] paid by the wealthier
classes." One Missouri congressman beamed that passage of the income tax
marked "the dawn of a brighter day, with more of sunshine, more of the
songs of the birds, more of that sweetest music, the laughter of
children well fed … wholesome Democracy shall be triumphant!"
As it now stands, the income tax is oppressive in its rates and
ridiculously complex. While a good argument could be made for
alternatives, the best solution to fixing the tax code is to return to
the lowrate simple form of 1913.
April 9, 2007 Edition
April 9, 2007 Edition > Section: Opinion >
Take Us Back to '13
BY LARRY SCHWEIKART - Mr. Schweikart, professor of history at the
University of Dayton, is author of "A Patriot's History of the United
States" and "The Entrepreneurial Adventure: A History of Business in the
United States."
April 9, 2007
URL: http://www.nysun.com/article/52085
Disclaimer: I hate taxes. I think I pay way too much in taxes. I
think my fellow Americans pay way too much in taxes, especially the
"rich." Perhaps some people aren't bothered that the top 5% of income
earners pay 53% of all income taxes, or that the top 10% pay 65%, but I
am.
Moreover, merely filing tax forms is a frustrating, difficult,
mistake-prone process. According to one recent study, only 13% of
Americans now prepare their own taxes, down significantly from 1993. The
cost of hiring someone to prepare a simple 1040 form can be as high as
$110, and studies have shown that preparation can consume up to 37.8
hours for the most basic return.
Why, then, do we have the system we have? How did it get to the
point that within a mere five years after being enacted, the lowest rate
had gone up by a factor of 25, and the lowest rates reached 75% of every
extra dollar earned? How did it get to the point that, prior to George
W. Bush's tax cuts, Americans worked until mid-May just to pay their
taxes?
Income taxes were sensibly prohibited in the Constitution. During the
Civil War, the Union secretary of the Treasury, Salmon Chase, briefly
implemented income taxes to help pay war bills, but they were
unsuccessful at raising funds. After the war, attempts to create an
income tax foundered when the U.S. Supreme Court ruled them
unconstitutional.
Without income taxes, throughout the 1800s, the primary source of paying
the government's bills came from import duties, and, secondarily, land
sales. By 1900, while federal lands were by no means vanishing, they
were providing steadily diminishing returns. The conservationist
movement, led by Teddy Roosevelt, argued for setting aside many of these
lands as national park and wilderness areas, further reducing income
that could be generated from sales.
Tariffs still paid exceptionally well at the turn of the century,
though, with virtually every imported product or raw material having a
duty.
The problem with tariffs was that Congress had to adjust the tariff
rates every few years. Even assuming that Congress was more efficient
and sensible at the turn of the century than today, can you imagine 400
or so legislators arguing over a tenth-of-a-cent increase in imported
hemp? Moreover, since before the Civil War, some
Americans—particularly those in the South—argued that tariffs merely
took money out of one group's pocket, the Southerners, and put it in the
pockets of another group, Northern businessmen.
So the first argument made to the public for adopting the income tax was
that it was fairer than tariffs and easier for Congress to administer.
Second, it originally was simple in design. The first income tax form,
which may be viewed at taxfoundation.org/blog/show/642. html, was one
page with six income brackets, beginning at $20,000. Anyone could fill
out the form.
Third, the original rates were stunningly low. From $20,000 to $50,000
the taxpayer paid 1%. Rates went up 1% in each of the brackets
thereafter, and the top bracket was 6% for those making over $500,000.
And there was a $3,000 personal deduction. To put these numbers in
perspective, a steak cost a quarter in 1920; a men's suit, $20; and a
Ford Model T under $600. In short, the vast majority of Americans would
never have paid any income taxes under that structure, and those who did
pay would barely feel it. There was no withholding, so potential
taxpayers had to save for tax day.
Those three factors — the complexity and political tension of the
tariff, the simplicity of the income tax, and the low rates — all made
the Income Tax Amendment an easy sell to the public. It might have
remained only a minor irritant if, over the years, rates had not
skyrocketed and legislators had not started using the tax code for
punishments and rewards, social engineering, and pet projects. Nor did
tariffs go away. Instead, Americans often got double-taxed.
Meanwhile, even after the tax cuts of the 1920s by the Treasury
secretary, Andrew Mellon, tax rates never fell back to their original
levels of 1913. "Tax creep" was common in both Democratic and Republican
administrations until, finally, rates would get so high that revenue
fell as people avoided taxes and reduced work. When a new, clear-eyed
politician would see that high rates were hurting government income, a
tax cut would follow, and the cycle would begin anew.
The income tax may have been "sold" to the public on the grounds of its
low rates and simplicity, but progressive advocates of the income tax
envisioned it exactly as it evolved — a tool of income transfer and
social engineering. It promised to, as one proponent claimed, "equalize
tax burdens borne by the various classes … [and] paid by the wealthier
classes." One Missouri congressman beamed that passage of the income tax
marked "the dawn of a brighter day, with more of sunshine, more of the
songs of the birds, more of that sweetest music, the laughter of
children well fed … wholesome Democracy shall be triumphant!"
As it now stands, the income tax is oppressive in its rates and
ridiculously complex. While a good argument could be made for
alternatives, the best solution to fixing the tax code is to return to
the lowrate simple form of 1913.
April 9, 2007 Edition
Sunday, April 8, 2007
The Freeman: Ideas on Liberty - February 1996
this was taught in our government school system. Imagine how much the skulls full of mush could learn and change the modern day confitaxation schemes
The Freeman: Ideas on Liberty - February 1996
Vol. 46 No. 2
View as PDF
Features:
Taking Taxes: The Case for Invalidating the Welfare State
By Donald J. Kochan
Mr. Kochan is a student at Cornell Law School and an adjunct scholar with the Mackinac Center for Public Policy Research in Midland, Michigan.
As attempts to downsize the welfare state continue, reformers are relying primarily on practical arguments—that transfer programs waste taxpayers' funds and hurt the poor, for instance. They do, but there is a more fundamental issue: social programs have no constitutional warrant. Even if such outlays fell under an enumerated power, they would still run afoul of the Takings Clause of the Fifth Amendment.
“Nor shall private property be taken for public use without just compensation” runs this critical protection in the Bill of Rights.[1] Properly interpreted, this clause prohibits taxing citizens to fund programs for the benefit of others, for doing so violates the requirements that any taking of “private property” be for “public use” and that the property owner receive “just compensation.”
Negative Liberty
The nation's founding was based on the concept of negative liberty: law exists to protect against coercive intrusions and not as a means for compelling action. Tort law expressly holds that an individual cannot be forced to give up a portion of his liberty to benefit another, no matter how little the cost. The common law “Good Samaritan Rule,” for instance, states that no one is legally obligated to provide any level of help to another in need.
As men consent to be governed, they agree to transfer certain enforcement powers, formerly held privately, to public law as a means of promoting efficiency and order. Thus, the constitutional compact merely shifts the enforcement of certain private law obligations to the State; it does not create new duties, with no pre-existence in the private law, except where expressly stated. Explained constitutional commentator Joseph Story: “A man has a perfect right to life, to his personal liberty, and to his property; and he may by force assert and vindicate those rights against every aggressor. But he has but an imperfect right to . . . charity . . . even if he is truly deserving it.” These imperfect rights “may not be asserted by force of law, but are obligatory only on the conscience of parties.”
Takings and Taxings
It is true that Article I, Section 8, of the Constitution grants Congress the power to lay taxes. The Sixteenth Amendment expanded this power by allowing the federal government to tax income. Obviously the government is given the power to tax.
In private law, however, C never has a claim to take A's property merely because C desires (or “needs”) it. There is no reason to believe that the Founders intended to grant C the power to employ the State to the same ends. Added to this is the fact that one of the most important goals of the Constitution was to guarantee property rights. This protection, defined broadly, was seen as the critical justification for government. Given this legal and philosophical backdrop, the restrictions of the Takings Clause should not be viewed lightly.
Granting government the power to tax does not release it from its obligations under the Fifth Amendment to spend such revenues only on those purposes of government which are for public use and provide compensation to all whose incomes are taken. Money is to be seized only to support the commonly understood function of government: the protection of individual rights from intrusion by the State or other members of society. This obligation forms the core of the Fifth Amendment.
Thus, the Takings Clause screens out illegitimate seizures by forcing all such actions to meet two criteria: (1) property is taken only for “public use”; and (2) “just compensation” is rendered to those whose property is taken. Transfer payments violate both of these limitations on the eminent domain power. Social programs transfer money from A (the taxpayer) to B (the government) for redistribution to C (the program beneficiary). In this case, government has taken private property from A for the private use of C. A derives no benefit, for C retains an undivided interest in A's property; therefore it is inconceivable that A is compensated at all, let alone justly.
The purpose of the State, and the Constitution's delineation of enumerated powers, clearly limits the federal government from acting as anything other than a public functionary. Accordingly, it is vital to define what constitutes a “public use” as a proper exercise of the government's power.
Eighteenth-century dictionaries help distinguish between public and private purposes. One source defines “public” as that which is “belonging to a state or nation; . . . regarding not private interest, but the good of the community.”[2] The usual understanding is that “public” involves those things in which all individuals have a common interest, not those in which certain people, in exclusion of others, have a specific interest.
The word “use” also indicates the narrowness of allowable takings. By including “use” instead of “purpose,” “interest,” “rationale,” “reason,” “benefit,” or similar term, the Framers chose a stricter test to judge the legitimacy of government action. All of these alternates would allow uses of any kind so long as the government could claim that the ultimate effect would prove worthwhile. Such constructs would leave the Takings Clause empty: Congress could contend that any action provided some subjective benefit or interest to society.
“Purpose” could prove more limiting in that it would require government to prove that it was exercising a legitimate role of government as found in the Constitution. “Purpose” alone, however, is somewhat ambiguous, and would allow transfer payments if such transfers arguably served some end of government in the long run. “Use,” however, incorporates the limitations of “purpose” while narrowing the field of legitimate actions even further. “Use” has retained the meaning of “employing with a purpose.”[3] This requires that the public entity actually exercise the use for which property is taken. The most appropriate correlation today would be the economic term “public goods.” A public good involves a government action for the indivisible benefit of all members of society.
Taken together, “public” and “use” can be further defined through three tests which distinguish between public and private uses. Genuine public uses must be inclusive, dividing equally the interest and surplus among all those in society; provide universal access; and be necessary, that is, address problems not susceptible to private solutions.
Inclusivity requires that no citizens be excluded from the benefits of the government's action. The court system, police power, and national defense all satisfy this requirement. Funding a program to protect one individual provides that protection to all. The benefits are not discriminately provided to only certain members of society. No one is excluded from satisfying a claim to the use of his property; rather, everyone retains access to the courts and police, for instance. It is necessary for government to fund national defense because individuals cannot protect themselves individually from foreign intruders. Redistributive programs, however, fail all of these tests.
Even if social welfare programs satisfied the “public use” portion of the Takings Clause, they would fail the “without just compensation” component. In cases where taxes constitute the taking in question, compensation can only be derived from the government function provided from spending such funds, since to require monetary compensation would leave the state's coffers empty and consequently defeat the purpose of taxation.
The 1755 edition of Johnson's Dictionary of the English Language defines “just” as “exact; proper; accurate; . . . equally retributed” and “compensation” as “something equivalent; amends.” Blackstone spoke of just compensation as “a full indemnification and equivalent for the injury thereby sustained.” This notion of equivalency is precisely that understood by the Framers when crafting the Takings Clause.
In most takings, the equivalency is paid in cash, but this is not the only means. The idea that taxes would be used to “provide for the common Defence and general Welfare”[4] indicates that takings for these purposes would be compensated by fulfilling the state's duty to protect individual rights.
Thus, the “just compensation” component follows the “public use” requirement. If universal access is missing, then some surrender taxes without receiving any or adequate compensation. Even if one argues that the term “public use” is not restrictive in itself, in relation to taxation only those uses that are public will offer sufficient compensation. Funding entitlement programs for which the taxpayer is ineligible violates this requirement.
Some might argue that indirect benefits from redistributive programs constitute compensation, just as they argue that “use” involves any effect of a taking which proves beneficial. However, the Founders likely chose “compensation” instead of “benefit” in anticipation of such arguments. “Compensation” is not the same as “benefit”; nondiscriminatory access to the actual use is the only means by which just compensation for taxes is possible.
Additionally, genuine compensation must be directly linked to the taking. It requires that the property seized be replaced by something equally valuable. Positive externalities resulting from the taking, even if real and measurable, are mere consequences of the use. They are not compensation.
End of the Welfare State?
Social Security, unemployment benefits, corporate subsidies, farm programs, ordinary welfare, and countless other manifestations of the welfare state all represent uncompensated takings redistributed for private use. Thus, all violate the protections afforded property in the Fifth Amendment.
Unfortunately, the courts today hardly remember that the Takings Clause even exists. And, admittedly, the welfare state has become so much a part of American society that it cannot be easily removed. The fact many people have come to rely on the welfare state, however, does not justify continuing to ignore the Constitution. Observed University of Chicago Law Professor Richard Epstein in his book Takings, “A correct theory at the very least can lead to incremental changes in the proper direction. . . . When the stakes are high, any shift in course has important consequences.”
It is time for defenders of liberty to appeal to constitutional principle as well as practical consequence. The Constitution requires no less.
1. U.S. Constitution, Amendment V. The correct interpretation of this clause also limits the power of the states through similar clauses in each state constitution.
2. Johnson, A Dictionary of the English Language (2d Ed., 1755).
3. Roger Clegg, Reclaiming the Text of the Takings Clause, 46 S.C.L. Rev. 531:, 543 (Summer 1995).
4. U.S. Constitution, Article I, Section 8.
The Freeman: Ideas on Liberty - February 1996
Vol. 46 No. 2
View as PDF
Features:
Taking Taxes: The Case for Invalidating the Welfare State
By Donald J. Kochan
Mr. Kochan is a student at Cornell Law School and an adjunct scholar with the Mackinac Center for Public Policy Research in Midland, Michigan.
As attempts to downsize the welfare state continue, reformers are relying primarily on practical arguments—that transfer programs waste taxpayers' funds and hurt the poor, for instance. They do, but there is a more fundamental issue: social programs have no constitutional warrant. Even if such outlays fell under an enumerated power, they would still run afoul of the Takings Clause of the Fifth Amendment.
“Nor shall private property be taken for public use without just compensation” runs this critical protection in the Bill of Rights.[1] Properly interpreted, this clause prohibits taxing citizens to fund programs for the benefit of others, for doing so violates the requirements that any taking of “private property” be for “public use” and that the property owner receive “just compensation.”
Negative Liberty
The nation's founding was based on the concept of negative liberty: law exists to protect against coercive intrusions and not as a means for compelling action. Tort law expressly holds that an individual cannot be forced to give up a portion of his liberty to benefit another, no matter how little the cost. The common law “Good Samaritan Rule,” for instance, states that no one is legally obligated to provide any level of help to another in need.
As men consent to be governed, they agree to transfer certain enforcement powers, formerly held privately, to public law as a means of promoting efficiency and order. Thus, the constitutional compact merely shifts the enforcement of certain private law obligations to the State; it does not create new duties, with no pre-existence in the private law, except where expressly stated. Explained constitutional commentator Joseph Story: “A man has a perfect right to life, to his personal liberty, and to his property; and he may by force assert and vindicate those rights against every aggressor. But he has but an imperfect right to . . . charity . . . even if he is truly deserving it.” These imperfect rights “may not be asserted by force of law, but are obligatory only on the conscience of parties.”
Takings and Taxings
It is true that Article I, Section 8, of the Constitution grants Congress the power to lay taxes. The Sixteenth Amendment expanded this power by allowing the federal government to tax income. Obviously the government is given the power to tax.
In private law, however, C never has a claim to take A's property merely because C desires (or “needs”) it. There is no reason to believe that the Founders intended to grant C the power to employ the State to the same ends. Added to this is the fact that one of the most important goals of the Constitution was to guarantee property rights. This protection, defined broadly, was seen as the critical justification for government. Given this legal and philosophical backdrop, the restrictions of the Takings Clause should not be viewed lightly.
Granting government the power to tax does not release it from its obligations under the Fifth Amendment to spend such revenues only on those purposes of government which are for public use and provide compensation to all whose incomes are taken. Money is to be seized only to support the commonly understood function of government: the protection of individual rights from intrusion by the State or other members of society. This obligation forms the core of the Fifth Amendment.
Thus, the Takings Clause screens out illegitimate seizures by forcing all such actions to meet two criteria: (1) property is taken only for “public use”; and (2) “just compensation” is rendered to those whose property is taken. Transfer payments violate both of these limitations on the eminent domain power. Social programs transfer money from A (the taxpayer) to B (the government) for redistribution to C (the program beneficiary). In this case, government has taken private property from A for the private use of C. A derives no benefit, for C retains an undivided interest in A's property; therefore it is inconceivable that A is compensated at all, let alone justly.
The purpose of the State, and the Constitution's delineation of enumerated powers, clearly limits the federal government from acting as anything other than a public functionary. Accordingly, it is vital to define what constitutes a “public use” as a proper exercise of the government's power.
Eighteenth-century dictionaries help distinguish between public and private purposes. One source defines “public” as that which is “belonging to a state or nation; . . . regarding not private interest, but the good of the community.”[2] The usual understanding is that “public” involves those things in which all individuals have a common interest, not those in which certain people, in exclusion of others, have a specific interest.
The word “use” also indicates the narrowness of allowable takings. By including “use” instead of “purpose,” “interest,” “rationale,” “reason,” “benefit,” or similar term, the Framers chose a stricter test to judge the legitimacy of government action. All of these alternates would allow uses of any kind so long as the government could claim that the ultimate effect would prove worthwhile. Such constructs would leave the Takings Clause empty: Congress could contend that any action provided some subjective benefit or interest to society.
“Purpose” could prove more limiting in that it would require government to prove that it was exercising a legitimate role of government as found in the Constitution. “Purpose” alone, however, is somewhat ambiguous, and would allow transfer payments if such transfers arguably served some end of government in the long run. “Use,” however, incorporates the limitations of “purpose” while narrowing the field of legitimate actions even further. “Use” has retained the meaning of “employing with a purpose.”[3] This requires that the public entity actually exercise the use for which property is taken. The most appropriate correlation today would be the economic term “public goods.” A public good involves a government action for the indivisible benefit of all members of society.
Taken together, “public” and “use” can be further defined through three tests which distinguish between public and private uses. Genuine public uses must be inclusive, dividing equally the interest and surplus among all those in society; provide universal access; and be necessary, that is, address problems not susceptible to private solutions.
Inclusivity requires that no citizens be excluded from the benefits of the government's action. The court system, police power, and national defense all satisfy this requirement. Funding a program to protect one individual provides that protection to all. The benefits are not discriminately provided to only certain members of society. No one is excluded from satisfying a claim to the use of his property; rather, everyone retains access to the courts and police, for instance. It is necessary for government to fund national defense because individuals cannot protect themselves individually from foreign intruders. Redistributive programs, however, fail all of these tests.
Even if social welfare programs satisfied the “public use” portion of the Takings Clause, they would fail the “without just compensation” component. In cases where taxes constitute the taking in question, compensation can only be derived from the government function provided from spending such funds, since to require monetary compensation would leave the state's coffers empty and consequently defeat the purpose of taxation.
The 1755 edition of Johnson's Dictionary of the English Language defines “just” as “exact; proper; accurate; . . . equally retributed” and “compensation” as “something equivalent; amends.” Blackstone spoke of just compensation as “a full indemnification and equivalent for the injury thereby sustained.” This notion of equivalency is precisely that understood by the Framers when crafting the Takings Clause.
In most takings, the equivalency is paid in cash, but this is not the only means. The idea that taxes would be used to “provide for the common Defence and general Welfare”[4] indicates that takings for these purposes would be compensated by fulfilling the state's duty to protect individual rights.
Thus, the “just compensation” component follows the “public use” requirement. If universal access is missing, then some surrender taxes without receiving any or adequate compensation. Even if one argues that the term “public use” is not restrictive in itself, in relation to taxation only those uses that are public will offer sufficient compensation. Funding entitlement programs for which the taxpayer is ineligible violates this requirement.
Some might argue that indirect benefits from redistributive programs constitute compensation, just as they argue that “use” involves any effect of a taking which proves beneficial. However, the Founders likely chose “compensation” instead of “benefit” in anticipation of such arguments. “Compensation” is not the same as “benefit”; nondiscriminatory access to the actual use is the only means by which just compensation for taxes is possible.
Additionally, genuine compensation must be directly linked to the taking. It requires that the property seized be replaced by something equally valuable. Positive externalities resulting from the taking, even if real and measurable, are mere consequences of the use. They are not compensation.
End of the Welfare State?
Social Security, unemployment benefits, corporate subsidies, farm programs, ordinary welfare, and countless other manifestations of the welfare state all represent uncompensated takings redistributed for private use. Thus, all violate the protections afforded property in the Fifth Amendment.
Unfortunately, the courts today hardly remember that the Takings Clause even exists. And, admittedly, the welfare state has become so much a part of American society that it cannot be easily removed. The fact many people have come to rely on the welfare state, however, does not justify continuing to ignore the Constitution. Observed University of Chicago Law Professor Richard Epstein in his book Takings, “A correct theory at the very least can lead to incremental changes in the proper direction. . . . When the stakes are high, any shift in course has important consequences.”
It is time for defenders of liberty to appeal to constitutional principle as well as practical consequence. The Constitution requires no less.
1. U.S. Constitution, Amendment V. The correct interpretation of this clause also limits the power of the states through similar clauses in each state constitution.
2. Johnson, A Dictionary of the English Language (2d Ed., 1755).
3. Roger Clegg, Reclaiming the Text of the Takings Clause, 46 S.C.L. Rev. 531:, 543 (Summer 1995).
4. U.S. Constitution, Article I, Section 8.
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