The Voice of the People ... or at least my own

April 28, 2002

Lately I've been asking myself questions which revolve around the nature of the interconnection between a government and its people. Consider this : every year the citizens and registered businesses file legal forms that determine how many taxes are owed to or collected from the government. Essentially then, our finances are intricately tied to the finances which support the operations of our government.

But what does this really mean?

You might draw the conclusion (and many have) that government is "taking" or "unnaturally" becoming entangled into our finances. Therefore, the government must be "rooted" out by the eradication of "onerous" taxes. Such a simple understanding however forgets that we must have a government. Government is the way large societies can effectively make decisions that must be made so that all the citizens can benefit and the society can function cohesively. What form that government takes, how that government operates, and what that government spends is what representative government is supposed to be discussing. Without government or the availability of real participation in government, our society will slowly slide into aristocracy and serfdom.

Government will have to spend money, and so government must somehow be funded. This country was very late to accept this reality at the national level. The federal income tax is a product of the 20th century that required not only a constitutional amendment, but also a favorable supreme court decision. This question could largely be ignored until the last 125 years because federal finances could be obtained by land sales from the enormous west and tariffs on imports. Until this century, most collected taxes were mainly local taxes on property or excise taxes on retail goods like liquor. After the Civil War, the strains on this system forced decisions to be made, but could not change the mental ethos which had evolved in the absence of a federal income tax. Under the Wilson administration, a surtax of 2 percent was assessed on incomes of more than one million and the beginning of what we know as the federal income tax was started.

During World War Two, the federal income tax was effaced upon the millions of paychecks across America for the first time. A nascent code of business taxes was started. Withdrawals from paychecks and regular payments from business was inaugurated.

This begets the question (a question at the crux of contemporary politics) : Was this necessary? Did government have to change to a tax system as we know it today? The answer to that question depends on your understanding of society. If we view government as a necessary part of a functioning society, if we view government as the only way our society can organize to make decisions that unorganized masses can never make, then we could never have a government without a tax system which is based on the people and the business of the nation. In pre-industrial society, taxes could come from land and shipped goods, because these entities represented the wealth and production of society in that time. In the modern world however, wealth is measured in both financial and resource terms, and since the former controls the latter the system had to change if government was to exist at all. A tax system that taxes only retail goods is doomed to fail. Consider the metaphor of an 8 cylinder car that only uses one cylinder : there will not be enough power to keep the engine running. The equitability and purpose of the tax structure should be the debated question.

If you recognize the development of the tax code, the meaning of the terms we use to describe our system become a little more clear. What is the difference between a government subsidy and a "tax credit" or "itemized deduction" ? Nothing really except the nature of the institutions involved. Instead of a government bureau which sends you a check per month, we have a government agency which investigates the veracity of the tax information provided on the copious forms. Whether the money is subtracted from the amount owed or taxable, is not different from income which is added as a deposit. Adjusting benefits and adding deductions is no different then a government subsidy.

I'm still unsure of what the implications are. You can come to your own conclusions.