Income tax

World Magazine ^ | Marvin Olasky

[tim_h]

As many of us have been filling out income tax forms over the past few weeks, it's been hard not to wonder: How did we get into this mess in the first place? Why did our ancestors ever agree to a complicated system with a morass of different rates, which means a bureaucracy waiting to happen? The answer: As with so many expansions of governmental power, the income tax was first sold as a minor measure. Some politicians and journalists issued warnings, but only after enactment of the tax did the full consequences become apparent. The warnings began in 1894, when Congress passed a bill imposing the first-ever peacetime income tax. Tied to a tariff-reduction measure, the bill required all citizens with incomes of more than $1,000 to pay a 1 percent tax. Since the dollar was worth much more then than it is now and incomes were lower, only about one out of every 100 Americans was affected. Leading newspapers were nonetheless furious. The New York Times, then a conservative Republican publication, called the income tax law "a vicious, inequitable, unpopular, impolitic and Socialistic scheme ... the most unreasoning and most un-American movement in the politics of the last quarter century." The Washington Post, then a conservative Democratic newspaper, argued that record-keeping requirements would force an employee to be "catalogued by his employer, as though he were a beast of burden." The Post called the graduated income tax an "abhorrent and calamitous monstrosity" that "represents a repudiation of the spirit as well as the letter of Democracy.... It punishes everyone who rises above the level of mediocrity.... The fewer additional yokes put about the necks of the people, the better for the commonwealth." The Chicago Tribune also predicted that the income tax would lead to distrust: "The tax can only be collected by prying into the private affairs of the people by arbitrary means hateful to the citizens of the republic." The Dallas Morning News complained that the income tax "attacked constitutional guarantees for tenure of property, for freedom of industry, for freedom of contract and for personal security." In 1895 the Supreme Court declared the income tax measure unconstitutional. It ruled that any such tax had to be levied in proportion to population, and not differentially by income level. The Washington Post lauded the court's decision: "This is still a land where honest men cannot be made to pay tribute." The New York Times predicted that "neither the Democratic nor the Republican party will ever attempt to revive the corpse that the Supreme Court buried yesterday." But the corpse was soon walking. Progressive Era politics created pressure for more federal spending, and the politics of class warfare led to support for having the rich pay more. In July 1909, Congress sent an income tax amendment to the states for ratification. Again The New York Times was in opposition: "When men get the habit of helping themselves to the property of others they are not easily cured of it." The Washington Post, however, was starting to become a house organ for the government bureaucracy: It changed sides and argued that an income tax was needed to "wipe out the deficit [then $89 million] without impairment of the public service or calling a halt upon needed public improvements." The Post argued speciously that the income tax would place a check on spending habits: "Congress will have to go slow in making appropriations unless the President is to be put in an embarrassing position. He will not want to increase the income tax, and if he had to do it would not hesitate ... to put the blame where it belonged. The provision will be a whip in the hands of the president to keep Congress toeing the mark of economy." The Dallas Morning News was even more optimistic, arguing the constitutional amendment would give Congress only authority to levy an income tax: "There would still be the question of whether the Congress would exercise the power thus given." New York and Massachusetts both rejected the amendment, but smaller states supported it. In February 1913, the 16th Amendment, authorizing an income tax, was ratified. By October, Congress had passed implementing legislation. But no one simply looking at the present was upset: Taxes were only on the rich, and rates were low. Only those who looked ahead were concerned. The New York Times soberly reported that the new income tax had established a "rock of credit from which abundant streams of revenue will flow whenever Congress chooses to smite it." The Times predicted, "We may be sure that it will be smitten hard and always harder, until the national conscience, if there is such a thing, revolts against the inequality and injustice of such a plan of taxation."

[kevkrom]

No, it didn't sail over my head. You throw out a lot of terminolgy, but fail to address the key issues:

1. Can corporate income taxes be accurately estimated? Yes, even if there is some short-term variability, taxes can be reasonably accurately estimated over the long term.

2. Can "employer's share" of payroll taxes be accurately estimated? Absolutely, it is included in payroll as any other employee-related cost.

3. Can complaince costs be accurately estimated? Yes. For small businesses, which comprise 90% of all corporations, complaince costs run an average of over 7 times as much as actual income taxes paid. Larger corporations can absorb the costs, relative to taxable income, better, but complaince costs still add a significant burden to their total tax costs.

Any business that does not take these costs into account when setting their product pricing will not stay in business for long.

[carenot]

Heres a bump from an old NRST flying monkey shill.

Support HR2525.

[Willie Green]

Can corporate income taxes be accurately estimated? Yes, even if there is some short-term variability, taxes can be reasonably accurately estimated over the long term.

Already addressed this back in #31:

Planning for corporate income tax obligations DOES occur as part of the budgeting process, however, this is only to assure liquidity of cash flow when actual payment of taxes (if any) is due. While budgeting interfaces with corporate costing and pricing procedures, they are NOT the same thing and should not be confused.

Take a look at any corporate annual report. Note where they report Profits BEFORE Taxes and Profits AFTER Taxes. That should give you some clue as to where Corporate Income Taxes fit into the calculations. They are NOT subtracted from revenues as a COST. They are NOT factored into the selling price.

If you have difficulty with the terminology, that's your problem.

[Equality 7-2521]

I thought maybe one of those degree mills that keeps sending me spam.

[Taxman]

You know, I never thought of that!

Either way, his ideological and his economics circuits are cross wired such that his "I'm confused" warning light is always on.

Willie the G is grist for our mill, and his erroneous bumps just serve to keep our tax threads "in play" longer. Which is good, because then we are able to reach and educate more FReepers.

“I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.”
[Thomas Jefferson, letter to Benjamin Rush, 1800.]

Scrap the Code! Scrap the IRS! Abolish the VLWC!

We will never be a truly FRee people so long as we have the income tax and the IRS.

[kevkrom]

Take a look at any corporate annual report. Note where they report Profits BEFORE Taxes and Profits AFTER Taxes. That should give you some clue as to where Corporate Income Taxes fit into the calculations. They are NOT subtracted from revenues as a COST. They are NOT factored into the selling price.

Willie, you are stringing statements together like you're trying to present an argument, but it falls flat on its face. It doesn't matter how the profits are reported, they are still factored in to the costs of running the business, and in turn into the price to ensure long-term profitability. Just because my paystub reports gross pay and net pay after taxes doesn't mean that I don't plan on those taxes being taken out, and plan my finances accordingly. Do you honestly believe that a business would have less sense than that?

Not to mention, you keep ignoring the costs of the payroll tax amd income/payroll tax complaince, which are essentially fixed costs, just like anything else in the production process. For the average small business, these costs are far more than their income tax liability and for the average large business, these costs are roughly on the order of the income taxes paid.

[gore3000]

No, the NRST is not worth fighting for. We have anger at the income tax, people see how much money is being extorted from them every year, every pay check for it. We should never replace it with a tax which cannot be estimated, cannot be seen, cannot be noticed. The income tax is smaller than the social security taxex. It is less than half the fed revenue and only about a quarter or a fifth of all the taxes people pay. However, they do not really know how much money they are being robbed by the other taxes so people don't complain about it. A tax which makes people angry is far better than a tax which people do not notice if we are ever going to get the government off our backs.

[kevkrom]

All of which points to the NRST as the better way to go. With the NRST, the entire federal tax burden of the individual is visible on each and every retail purchase. There is nothing hidden or un-estimatable about it -- it's charged on all retail items and explicitly itemized. Under the income tax, over half the population believes they pay little or nothing. Under which scenario do you really think people are going to get angrier about the massive size and cost of the federal government?

The government's big con is that they can convince the majority of the population that "someone else" is paying all of those taxes -- the "rich" or those "evil corporations" -- even if a large amount of those taxes eventually get paid, in one form or another, by the average Joe in higher prices, lower wages, and higher interest. With the shell game they play, this same majority suppoorts all of the government spending programs because they don't think it costs them anything.

But imagine instead a system where every time you buy a loaf of bread, a movie ticket, a CD, etc., you see you tax burden on the receipt. And when a tax cut benefits everyone pretty much equally, then pretty much everyone is going to be in favor of it. When the choice is phrased like "keep the national endowment for the arts (and some other worthless programs) or take an X% cut in the sales tax", then we can have an honest look at who thinks that should be a government program and who doesn't.

[kevkrom]

The income tax is smaller than the social security

The NRST replaces both of those, plus estate and gift taxes.

[gore3000]

The NRST replaces both of those, plus estate and gift taxes.

That's one of the problems with it. We need to get rid of the SS tax and privatize Social Security. Right now it is the biggest hoax and theft perpetrated on the American people.

The other problem with the NRST is that it does not reduce taxes it keeps giving the monster the same and/or more money than it already extorts from the American people. This is only making tyranny more palatable. Sorry that is not a conservative position, it is a socialist position.

[kevkrom]

The short answer is that the NRST bill addresses revenue only. It doesn't address spending. These are seperate concerns -- and must be addressed separately in Congress. Attempting to lump too much into a single bill will ensure its defeat.

That's one of the problems with it. We need to get rid of the SS tax and privatize Social Security. Right now it is the biggest hoax and theft perpetrated on the American people.

Agreed, but see above. Until social security is gotten rid of (and the sooner, the better), we still need to collect the taxes to pay for it. getting rid of social security would knock the required NRST rate down from 23% to around 16% -- get rid of Medicare too and the rate drops down to just under 15%.

The other problem with the NRST is that it does not reduce taxes it keeps giving the monster the same and/or more money than it already extorts from the American people. This is only making tyranny more palatable. Sorry that is not a conservative position, it is a socialist position.

Congress will not even consider a bill that is not revenue-neutral, so again, trying to tie too much into it will kill it. If spending is decreased, then the provisions of the NRST would lower the tax rate in successive years.

This by no means makes the government "more palatable". While it does make complaince easier (and gets rid of a lot of wasted effort and expense), it should also be a rude shock to those who believe that "someone else" pays the taxes. It gives individuals explicit insight into how the size of government affects their daily lives. Under the income tax, things are more "palatable" because most people have absolutely no idea what the out-of-control government costs them. When it's explicit, then they can make an informed choice -- and that is precisely a conservative position.

[Constitution Scholar]

Rep. Bartlett Income Tax Synopsium

[gore3000]

The short answer is that the NRST bill addresses revenue only. It doesn't address spending. These are seperate concerns --

The short answer is that the NRST is not reform of the tax system. It is an attempt to make the extortion of money from citizens easier and more palatable. Therefore it is not reform at all. It is a continuation of the tyranny which will make it even harder to achieve the reforms which are required.

[kevkrom]

Nonsense. The NRST is serious reform -- it keeps the IRS thugs from peering through your personal records. It gets rid of the requirement to report your finances to the government. It gets rid of the social engineering in the code.

Just because the mechanism for the paying the taxes will be easier and less obtrusive, it doesn't make those taxes more palatable. On the contrary, it does just the opposostie. The income tax does a great job of hiding the fact that all taxes are eventually paid by individuals; and the true level of taxation is likewise hidden in a VAT-style manner. Under the current system, many people believe they pay no taxes, even though their actual burden is outrageously high.

Under the NRST, however, there is no sleight-of-hand. taxes are levied directly on an individual, for that individual's actual tax burden. No hidden taxes, no pretense that some "corporation" is paying taxes so you don't have to.

Here's a challenge for you... can you figure out your exact federal tax burden for last year? I can imagine you may be able to estimate it reasonably well, with some work, but you'll never have an exact number. Under the NRST, anyone can figure out their total burden easily, just by saving their receipts.