Answers to America's Tax Problems
Dear Friends, How should we let the federal government tax us? Over the years, and especially during presidential campaigns, this subject has probably received more attention than any other. In our current election year, one candidate has centered his campaign around the proposal for a flat income tax. In the race for the Republican nomination, there is little enthusiasm for the present tax system. They all seem to realize it has to go. Amazingly, however, in all the debating, only one candidate has even hinted of the Founders' wisdom as contained in their original constitutional formula.
The Founders had the Answers to America's Tax ProblemsSince the founding of NCCS in 1971, we have been making the bold declaration that the Founders had answers to nearly every problem that exists in America today. The problem of federal taxation is no exception. When the Founders gathered at the constitutional convention in 1787, they had already concluded, mostly from experience, at least five things about taxes:
- An assessment or requisition against each of the states is impossible to enforce without inviting civil war, since the only way to collect the money is by sending in a federal army to coerce the state into paying.
- It is important to distinguish between direct and indirect taxes. For example, duties, imposts, and excise taxes are taxes on "things," not on states and not on individuals. These are what we call "indirect" taxes, since they can be passed on to the person who is the final purchaser of the goods and thereby pay the tax "indirectly." Indirect taxes are much less painful to collect than direct taxes, since direct taxes are levied directly against individuals and their personal property and cannot be passed on to anyone else.
- Because the demands of the federal government were expected to be modest, it was felt that the duties on imports would be sufficient to operate the federal government in ordinary times.
- It was recognized, however, that in case of war or dire emergency it would be necessary to impose direct taxes on individuals and their property. Experience had demonstrated that direct taxes are deeply resented by the people, especially those of considerable wealth, who find large quantities of their personal assets being expropriated whereas others will be giving up far less. Direct taxes are always perceived as being unfair to the individual no matter how carefully they are collected.
- In allocating or apportioning any direct taxes to the various states, the Founders had concluded that these should be based on population rather than wealth, since wealth is too difficult to calculate. (See The Making of America, page 372)