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The Income Tax In America: What Has Happened?
| Article
# : |
18821 |
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Section : |
MODERN THOUGHT
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| Issue
Date : |
12 / 1991 |
4,058 Words |
| Author
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Robert E. Keleher
Robert E. Keleher, formerly an economist with the Board of
Governors of the Federal Reserve System, is associate director
of the Center for Global Market Studies, George Mason
University. |
The twentieth century has witnessed a rapid growth in government and, correspondingly, shifts in forms and rates of taxation to finance this growth. Most industrial economies have relied increasingly on income or payroll taxes as well as large alterations in their tax rates to pay for big government, and the United States is no exception. Nonetheless, despite these similarities, our experience is unique; U.S. history has shaped the form and role of taxes in America as well as Americans' attitudes toward taxation. In fact, U.S. history begins with the American Revolution, which was, of course, a tax revolt.
Our Founding Fathers were inspired to unite the colonies against Britain's mercantilist policies of substantial government intervention and high taxation. High tariffs as well as transport tolls, church taxes, and excise taxes were commonplace. Moreover, after 1763, Britain imposed and enforced a set of additional taxes to help pay for her war with France; these taxes triggered colonial reaction and spawned America's revolt against burdensome government regulation and high tax policies.
The colonists' response to the British imposition of taxes and regulations was in part a reflection of the economic ideas and attitudes endorsed by classical liberal thinkers such as Locke, Montesquieu, and Hume. The tax-related views of these philosophers influenced American laymen as well as statesmen such as Jefferson, Madison, Franklin, and Adams. In turn, these views had a potent impact on the crafting of the U.S. Declaration of Independence and Constitution.
The principle of taxation espoused by these philosophers were also endorsed by classical economists such as Adam Smith and John Stuart Mill. These thinkers shared our Founding Fathers' belief that liberty denoted the right to reap the rewards of one's efforts. They understood that high rates of taxation on labor and capital take away economic incentives to produce and, in so doing, not only reduce economic growth but also impinge on liberty. Low rates of taxation, on the other hand, foster production, supply, and economic growth. Accordingly, they recommended low rates of taxation to spur economic growth and create higher living standards. These are the policies upon which our country was based.
Principles of Taxation Underlying the Early American Experience
Our founding Fathers envisioned a small government that required a small tax burden. Based upon the prescriptions of classical
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