America is a nation of tax whiners.
It is one of our least attractive features. I understand complaining about tax money ill spent; I understand about fretting over taxes being spent on programs we disagree with. In such cases, one should petition for reform of the wasted money or campaign for representatives who will repeal the programs. But complaining merely about taxes seems entirely beside the point.
After all, the very people who most whine about taxes are the same people who scream at the top of their lungs of American exceptionalism: “We’re Number One!”
But, if you live in a country club, you have to pay the dues.
Whine, whine, whine.
It is our unofficial national anthem.
We were founded on the principle of complaining about taxes, and the whining has never ceased despite that Americans pay less in tax than citizens in most other developed countries.
According to the Organization for Economic Cooperation and Development, the only developed nations that have less of a tax burden than the United States are Australia, Japan, Korea and Mexico.
Total tax revenue in the United States is a shade more than 29 percent of the Gross Domestic Product, 25 down the list from the world tax leader, Sweden, which pays more than 50 percent of its GDP in tax.
We are beat out by all of Europe. The median percentage on the list for Europe is about 35 percent of GDP, and the average is above 40 percent.
Many, of course, would say that Americans pay less tax precisely because of their chronic whining — to which we also owe our prosperity and our freedom. Whether you agree, it’s likely that seldom before in history has there been a people who expected so much — in terms of government service — for so little. And in recent years, America’s traditional anti-tax sentiment has increasingly blended into our resurgent demonization of government in general.
Today you cannot turn on a television newscast without hearing a politician or a protester complain that American taxes are unconscionable.
“Taxes are too high and government is charging more than it needs,” said President George W. Bush in his budget speech to the joint session of Congress. “The people of America have been overcharged.”
His answer at a time of two unfunded wars: tax cuts. Whoopee!
This has always been gospel in America. The fighting cry for independence in the 18th century was, “No taxation without representation,” although the protest often seemed more against taxation of any kind.
In 1776, in fact, the American colonists paid less per capita in taxes to the crown than mainland English citizens did. And they paid five times more tax in 1698 than they did in 1773, the year of the Boston Tea Party.
It is ironic that the most famous act of tax rebellion in our history actually protested the elimination of a tax. How many of our current Tea Party activists know that?
The colonists had paid a tax on tea for years, but in 1773 the British Parliament allowed the British-owned East India Co. to sell its tea in the colonies tax free, making its tea cheaper than the American-imported product and essentially creating a tea monopoly.
There were other taxes that colonists found intolerable even when the amount of money collected was nominal. The Sugar Act of 1764 and the Stamp Act of 1765 added fuel to the pyre of anti-tax sentiment.
The true call, it seems, was then, as now, for representation without taxation.
But even after independence, when taxation came with representation, the first serious threat to the new nation came in the form of a tax revolt — the Whiskey Rebellion of 1794, in which farmers of western Pennsylvania rioted against excise tax collectors. President George Washington had to lead the Army one last time to quell the revolt.
Four years later, when Congress enacted the Federal Property Tax to pay for the expansion of the military in anticipation of a feared war with France, John Fries began what is known as Fries Rebellion in opposition to the tax. Fries was tried and convicted of treason, though he was pardoned by President John Adams in 1800, not long before Adams left office.
The first American income tax was floated soon after to pay for the War of 1812, but the war ended before any tax money was collected, so it died a-borning.
It was reanimated during the Civil War; an income tax was collected from 1862 to 1872 although even then tax rebellion was afoot in the form of widespread tax evasion.
More to the point, there is an undercurrent of American historical thought that believes taxes were the primary cause of the Civil War.
Abraham Lincoln had promised the South that if elected he would not interfere with slavery. But he also promised in his inaugural address that he would enforce the collection of excise taxes even if the South attempted to secede. Those taxes were highly unpopular in the South as they favored Northern industry.
An income tax was tried again in 1893 under President Grover Cleveland. The primary income of the federal government had always been tariffs on the import of foreign goods, but Cleveland ran on the platform of reducing tariffs, which had restricted free trade. To make up for the lost revenue, he asked for an income tax on corporate earnings. The following year, Congress passed such a tax, expanded to include personal income.
The Supreme Court would have none of it and struck down the tax as unconstitutional.
The issue was Section 9 of Article I of the Constitution, which said, “No capitation, or other direct, Tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”
Which meant that the collection of direct taxes — as opposed to indirect taxes such as sales taxes — must be made in proportion to the populations of the various states. This made a simple income tax nearly impossible.
But as populist sentiment arose at the turn of the century, many saw an income tax as a way of getting money from the rich.
Theodore Roosevelt advocated a graduated tax on inheritance in 1906. In 1908, he called for Congress to enact a progressive income tax.
But the Constitution still stood in the way.
So, an amendment was proposed, which came into law in 1913 as the 16th Amendment, authorizing an unapportioned income tax. By the way, the Senate voted for the amendment 77 to 0, and the House of Representatives followed, voting 318 to 14. It was hardly a squeaker.
The first income tax under the new amendment gave a $4,000 exemption to families (perhaps equivalent to a $40,000 exemption today) and then charged 1 percent on the first $20,000 above that, 2 percent at $50,000 and a maximum rate of 7 percent on incomes above $500,000.
World War II made the big difference, spreading the tax burden into the middle class. Before the war, about 15 percent of the people paid all of the income tax. After the war, 80 percent paid it.
That is when the federal government first started payroll withholding. During the 1930s, federal individual income taxes never topped 1.4 percent of the Gross National Product. During 1990, that number was 8.77 percent.
The income tax remains the single most contentious tax we pay. And it is the center of most of modern whining.
“When the 16th Amendment became law in 1913,” wrote Robert Ringer in his book Restoring the American Dream, “an important step was taken in laying the groundwork for the destruction of the spirit that had made America the freest, strongest and most prosperous country in history.”
It might be noted that it wasn’t until after the income tax that America, in fact, rose above the level of a Third World nation and became the strongest, most prosperous country in the world.
But the complaints continue.
There was a local tax revolt in Chicago in the 1930s during the height of the Depression and another in California in the 1970s.
The latter revolt still reverberates today, culminating most recently in the Taxpayers Bill of Rights passed overwhelmingly by Congress and signed into law by President Clinton in 1998.
But there was an edge to that 1970s movement, championed by Howard Jarvis, among others, that began to question not just tax but the legitimacy of government.
It resulted in the passage of Proposition 13 in 1978, which limited the state’s ability to increase property taxes. Jarvis was an unlikely revolutionary; he looked more like a jowly retiree bearing photographs of his grandchildren, but he had a mission and a message:
“Tax, tax, tax, spend, spend, spend; elect and elect and elect, is bankrupting we the American people and the time has come to stop it.”
Implicit in his message was a growing mistrust of government in general.
“Proposition 13 in California was an assault not simply on taxes but on government as we know it,” tax historian Elliott Brownlee has said. “It was really the beginning of an anti-government crusade that has continued.”
More extreme elements of this sentiment thrive all over the Internet, in scores of screed-filled Web sites about the evils of tax, government and a one-world conspiracy. One describes taxes as the “economic rape of America.”
“Tax is theft,” it says, “legalized robbery, crime” — begging the question how something legal can be a crime. It is called parasitism, cannibalism, cancer and, alternately, a Mafia protection racket.
Such ranting is the equivalent, amplified and larded with aggressive hype, of the pamphleteering of Tom Paine and others more than 200 years ago. Appealing to the emotions and an unrefined sense of personal freedom, with little sense of practical reality or the interconnectedness of society, they are the screams of our national id.
The founding fathers, it could be said, created the Constitution as a kind of superego to that id, to help Adam Smith’s famous “unseen hand” bring collective benefit out of the selfishness of the individual.
Certainly, as April 15 spins around each year, we all grow anxious: No one likes paying. And if we could run our government on less money, we’d all breathe easier. But taxes, in and of themselves, are at the very least a necessary evil. America would hardly maintain itself if no one paid teachers or built roads. We should decide what we want from government and argue over that, rather than whine about having to pay anything at all.
Jean Baptiste Colbert, finance minister to King Louis XIV of France in the 17th century, once famously said, “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
On this count, America may have the world’s lowest threshold of pain.
A look back
Tax receipts can be found among the oldest artifacts of human civilization. Wrapped in a pottery ball from the fourth millennium B.C. discovered in the Near East are the records of a tax having been paid.
The earliest taxes, though, probably came in the form of work extracted. People would be required to work for the state for a given period of time each year. They provided the labor to build roads or pyramids or fill the ranks of armies during war. The military draft was a late remnant of such taxation.
Before money, when tax was exacted, it came in the form of crops and cattle.
In ancient China, one fifth of a farmer’s crops was taken as a “flat rate” tax. A poem from the Chou Dynasty complained about big government: “Big Rat, Big Rat, do not gobble your millet.”
But by the time of the Roman Empire, tax was often monetary. Under Julius Caesar, for instance, a 1 percent sales tax was introduced. And at an early date, a 5 percent inheritance tax was created — later raised to 10 percent — although applied on only what was left after bequests to wife and children.
Roman taxes at first relied on “tax farming” — that is, hiring private enterprise to collect the taxes. These were the publicans mentioned in the Bible, who grew so corrupt that Caesar Augustus outlawed the practice, putting civil servants in charge of gathering the money.
The first income tax was created in 1799 in England to raise money to fight Napoleon. It was repealed in 1816.
In the United States, the first income tax came in 1862 to help underwrite the Civil War, 50 years after an aborted attempt to help finance the War of 1812.
In one of those periodically surreal pronouncements from Washington, D.C., the tax commissioner said, “The people of this country have accepted it with cheerfulness.”
A more realistic assessment of how happy people were can be found in 1870 — the year of the highest compliance for that first income tax — in a nation of 38 million people, that only 276,000 people filed returns.