Representation Without Taxation

Amity Shlaes tells NPR’s Kai Ryssdal that the current tax system reverses the problem that the founders faced.

Taxation without representation. That’s what our nation’s founders rebelled against. Subjects in the colonies were sending money home to the crown without getting say in their own government. The course of U.S. history can be seen as progress by those who are taxed to get representation. Think of women with the 19th Amendment.

Along the way we began to pay out money to groups that paid no income tax at all. There’s Medicare, of course, for senior citizens, even if they never worked; welfare for the poor and struggling, at least through the 90s. And, more recently, there’s the earned income tax credit, a break for low income workers. The credit was designed to make people want to work and to offset their heavy pension payments for Social Security. The result of expanding it, however, is that many people who work don’t pay income tax. Instead, they get money back.

Do we want to help weaker citizens, especially in downturns? Totally. In fact, both parties have plans that relieve yet more taxpayers of their burden. Republicans like payroll tax holidays. And the Obama administration is zeroing out the income tax obligations of yet more citizens.

But a tipping point does come when too many are paying out and too few are paying in. Maybe that tipping point is now. Today, households in the bottom half of earners pay only 4 percent of the income taxes. One tiny group, the top 1 percent, pays close to 40 percent.

There’s an argument to be made here but, sadly, Shlaes doesn’t make it well aside from the catchy turn of phrase.    It makes no sense to talk about the percentage of taxes paid by various income brackets without comparing their relative earnings.   And it’s unfair to talk about the tax burden while excluding the taxes that hit lower income folks hardest, like the payroll tax and sales taxes.

The better argument for ensuring that everyone pays their fair share of taxes is one that predates the founding of the United States, namely that of stake-in-society.  Essentially, what we now term skin in the game.  Everyone who gets the right to vote should have some measure of the burdens of society, including payment of taxes, service on juries, answering the call to arms during wartime, and so forth.  Under that principle, all adults living in the United States should pay some taxes to the federal government.

Everyone who buys things pays something to state and local governments because of sales taxes.  Everyone who draws a paycheck pays into the federal Social Security “trust fund,” of course, but that’s at least theoretically a retirement fund rather than a contribution to the general welfare.  Since we fund the federal government primarily through income taxes, we should ask even those of very modest income to pay something, even if it’s essentially a token amount.

FILED UNDER: Economics and Business, Politics 101, , , , , , , , , ,
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Pete Burgess says:

    James, I couldn’t agree more. At the same time we should adopt a tax system that rewards saving and investment rather than the one we have now which punishes saving and investment. The one we have now allows a few (Congress) to dictate how and when we pay. How about one which allows the tax payer the choice of how and when he pays? Call it The Fair Tax. Do your homework on the Fair Tax and you’ll see why it is the best tax reform idea available.




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  2. Pete Burgess says:

    Since we fund the federal government primarily through income taxes, we should ask even those of very modest income to pay something, even if it’s essentially a token amount

    And they would, under the Fair Tax, but only when they bought new goods and services. People living off dividends and capital gains pay nothing towards FICA, but they would under the Fair Tax when they bought new goods and services. Underground economy, criminals, tourists from overseas, would all pay the Fair Tax when they bought new goods and services.




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  3. Dave Schuler says:

    Until, roughly, World War II unless Americans bought things that were subject to the many federal excise taxes they rarely paid any taxes to the federal government at all. Tax evasion was rampant and the reality was that most Americans haven’t paid federal taxes for most of the country’s history.

    Representation without taxation is the norm, not the exception.

    However, during most of the same period the franchise was limited as well. Women didn’t have the vote, minors didn’t have the vote, slaves didn’t have the vote, and, depending on what state you lived in, there may have been literacy requirements, land ownership requirements, or it may have been necessary to pay a poll tax.

    That didn’t mean you weren’t represented; it just meant you had no say in who represented you.

    I think it’s reasonable to ask what sort of society we’d like to have and who should decide. I don’t think it’s reasonable to point to some imaginary past and suggest that, for example, Jefferson’s America of yeoman farmers all participating in representative government was ever the actual case.




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  4. James Joyner says:

    most Americans haven’t paid federal taxes for most of the country’s history

    Didn’t we have a head tax that was paid via the states?

    I think it’s reasonable to ask what sort of society we’d like to have and who should decide. I don’t think it’s reasonable to point to some imaginary past and suggest that, for example, Jefferson’s America of yeoman farmers all participating in representative government was ever the actual case.

    Agreed.




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  5. Alex Knapp says:

    Let me add that the very poorest are also paying taxes via excise taxes, as they’re more likely to buy goods from other countries, esp. China.

    Ideally, if we wanted to phase out the income tax, we’d start with the poorest and right before it was out, only the very rich would be paying it.




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  6. odograph says:

    I heard the “every one should pay some tax” line from my boss this week, which is a clue that it is probably on conservative talk radio.

    I’m fine with it in the abstract, but it seem inefficient to pay those on “assistance” of various sorts, and then tax them back again. Unless by “tax” you man put a line on their check stub deducting something off a higher starting amount.

    FWIW, to get ahead of the curve, I think the problem right now is that our tax brackets are too closely spaced (in 2008: 8K, 33K, 79K, 165K, 358K)

    The top rate should kick in somewhere north of a million, and be much more aggressive than 35%

    Why not 75% of the part over $5 million per year? It would have the added benefit of reducing short-term thinking, and induce players to look for long-term success. (In order to spread those millions over a decade.)




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  7. Pete Burgess says:

    Why have an income tax at all? Why not a consumption tax?




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  8. Dave Schuler says:

    Frankly, I think everybody’s missing the point about taxes. The problem that we have is that we can’t allow outlays by the federal government to increase faster not only than revenues but also faster than prospective revenue streams.

    Right this second we could reduce the deficit dramatically by increasing marginal tax rates and maybe that’s something we should do. However, at the expected rate of increase in outlays (including FY 2009), particularly due to Medicare and rising interest payments, outlays will increase faster than all but the rosiest of forecasts of GDP growth.

    That can’t be cured by taxes. Only by reducing outlays.




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  9. odograph says:

    Dave, I’m totally down with reducing spending. I’d even do it now, in this contraction, if I could also do a temporary “surge” in unemployment benefits and the like.

    I don’t talk about it though because I think spending cuts have to take money from the middle class, and they are just not ready to accept that.

    Governors grand-stand about not taking stimulus, but they fund high school band competitions while cutting unemployment. Why? Who are the voters and what are they unwilling to give up?




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  10. PD Shaw says:

    Didn’t we have a head tax that was paid via the states?

    Before the income tax, the federal government relied almost exclusively on revenues from either tariffs or land sales. I believe that during the War of 1812, James Madison signed a personal property tax (not paid via the states) and during the Civil War, the North enacted an income tax that excluded most wage earners because the tariff was believed to be regressive. The South enacted a property tax to be collected by the States, but only one state complied, the other’s paid the tax by printing state money.

    The country never had a concensus on taxes or spending until the twentieth century, and even those who wanted higher taxation for more governmental improvements (like New York) didn’t want to share.




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  11. Dave Schuler says:

    if I could also do a temporary “surge” in unemployment benefits and the like.

    That’s the kind of measure I wanted exclusively in a stimulus package: things that could be disbursed entirely in the 2009-2010 timeframe, were most likely to be spent, and that wouldn’t produce large, permanent “out-year” commitments.




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  12. odograph says:

    I wanted time-shifting, bringing forward spending that we really were going to do anyway, and the ‘surge’ in safety net type spending.

    Both would be moves toward the counter-cyclical.




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  13. spencer says:

    Medicare and social security recipients have paid medicare and social security taxes for years before they start to collect.

    Your original and Shays statement that social security and medicare is paid to people who have not paid taxes is completely misleading.

    You are playing with words by claiming they did not pay an income tax and ignoring the point that they paid a payroll tax.

    As long as conservatives/libertarians count on their audience being too stupid to not know the difference, how can you expect to be taken seriously by anyone who understands the silly games you are playing.




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  14. Web Smith says:

    Wasn’t NPR the place that accused Ron Paul of being a racist? What should we do with “weaker” citizens during downturns? Northern Ireland had a law for a while that said that only people who paid taxes could vote. We will have the ARA instead of the IRA. Please deprive the poor of their right to vote. The poor fought the Revolution for us and they will fight this one, too.

    We pay every tax levied. If you tax business, they add the tax to the price of their products. They also add licensing and regulatory testing fees. States send a good portion of the various taxes that they collect into the feds. There are federal taxes on gasoline. If Obama gets his carbon taxes with his budget, everyone will pay many times more in taxes than they received from the stimulus. Don’t worry about people being taxed.




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  15. mannning says:

    The Fairtax I read about starts with a pretax payout to each registered taxpayer that is supposed to approximate a living wage, and then taxes consumption at a single rate, such as 20% or so.

    All other taxes would be eliminated by means of an amendment to the Constitution, especially the progressive income tax, Social Security, and Medicare. This Fairtax is supposed to be revenue neutral by definition. Since everyone that has registered receives a pretax “living wage,” SS becomes unnecessary.

    Seems fairer to me than the current progressive system, and it certainly requires that all citizens pay some tax through their yearly consumption. The wealthy would pay more as well as they consume more, perhaps even more tax than they pay now, since the consumption tax cannot be avoided.

    That many citizens pay no tax, yet have the vote, is a prescription for ever-increasing levies on the well-to-do and the rich, and ever-decreasing levies on the rest, by popular demand. That is what is supposed to happen real soon now under Obama.

    Changing out the income tax would be difficult for us, since the no-tax and dun-the-rich constituency is so strong.




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  16. davod says:

    “Dave, I’m totally down with reducing spending. I’d even do it now, in this contraction, if I could also do a temporary “surge” in unemployment benefits and the like.”

    A surge in unemployment benefits and the like is spending.




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  17. Pete Burgess says:

    Mannning, if you get back to this thread, be advised you misunderstood the Fair Tax “Prebate.” It does not provide a living wage, it rebates the Fair Tax a person or family would pay on basic necessities up to the income poverty level as defined by Health and Human Services. Any expenditures beyond this level are subject to the Fair Tax. I am delighted you have become interested enough to research it. Too bad the policy wonks who clutter their thought with senseless debates over existing tax policy aren’t forward thinking enough to research the Fair Tax.




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  18. Eneils Bailey says:

    “If you drive a car,
    I’ll tax the street.
    If you drive to city,
    I’ll tax your seat.
    If you get too cold,
    I’ll tax the heat.
    If you take a walk,
    I’ll tax your feet.

    Taxman!

    ‘Cause I’m the taxman.
    Yeah, I’m the taxman.”

    Written by: George Harrison.
    Performed by: The Beatles.
    Exemplified by: President Obama:
    Dispised by: Nearly all productive Citizens.

    It ain’t Robert Frost, Lord Alfred Tennyson, Shakespeare, etc.., but these guys never played in a rock band.




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  19. Eneils Bailey says:

    Everyone who buys things pays something to state and local governments because of sales taxes. Everyone who draws a paycheck pays into the federal Social Security “trust fund,” of course, but that’s at least theoretically a retirement fund rather than a contribution to the general welfare. Since we fund the federal government primarily through income taxes, we should ask even those of very modest income to pay something, even if it’s essentially a token amount.

    Come on, getting back more than you pay, in FEDERAL INCOME TAXES on a permanent basis, is sucking off the productivity of responsible citizens.

    I use tokens on the subway and bus routes.

    A lot of you folks want to argue minutiae, as the five ton elephant in the room, sits in your lap, pisses in your face, lifts your wallet, and then strolls out of the room, and you feel convinced that this is for “the common good.”
    The only thing “common” was an over-bearing elephant.




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  20. mannning says:

    PB: Yes, I probed the book again, and you are right. Thanks for the correction. So what it does do is to make income up to the stated poverty level free of the Fair Tax by virtue of a rebate.

    So, in the case of the Fair Tax, in effect citizens under the poverty level pay no federal taxes. But, more to the point, everyone, be they good citizens, super-rich, or be they gangsters, dope peddlers, or other deadbeats, are snared into paying federal taxes on their consumption, which would materially increase the effective tax base.




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  21. Eneils Bailey says:

    But, more to the point, everyone, be they good citizens, super-rich, or be they gangsters, dope peddlers, or other deadbeats, are snared into paying federal taxes on their consumption, which would materially increase the effective tax base.

    Does this mean that you endorse going after most of the member’s of President Obama’s cabinet?

    Good God, a balanced budget is not that far away…




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  22. Pete Burgess says:

    Mannning, you are correct.

    Portion of comment in violation of site policies deleted. If you wish to buy advertising for your pet agenda, contact me for rates.




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  23. mannning says:

    Pete, I applaud your attempt to avoid the label of troll, but that is the tool used by those who disagree with anything you post to denegrate you, and not to respond to your ideas. It is very much in the spirit of the Alinski Rules.

    I have seen very little of that here on OTB; the most used tactic is simply to ignore your posts. So long as you are not banned, just keep on posting! There are those reading this site that you may influence.

    The second most used tactic is to engage you in piecemeal debate; that is, to pick merely one aspect of your post to challenge, as though simply questioning that one statement invalidates your entire argument. This tactic is very common.

    Thanks for the references; the Fair Tax site is now on my favorites list.




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  24. Bithead says:

    It ain’t Robert Frost, Lord Alfred Tennyson, Shakespeare, etc.., but these guys never played in a rock band.

    True. And irony time: The words were written by a dedicated socialist, John Lennon, who was pissed at the amount of money being confiscated by the British Government.

    (Snicker) Funny how he didn’t figure things out even then.




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  25. Alex Knapp says:

    Bithead,

    George Harrison wrote “Taxman”, not John Lennon. Also, Lennon wasn’t a socialist. You’re confusing him with Vladimir LENIN…




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  26. Bithead says:

    George Harrison wrote “Taxman”, not John Lennon. Also, Lennon wasn’t a socialist. You’re confusing him with Vladimir LENIN…

    So, why is “imagine” regaded then as a an anthem of the world sociallist movement?

    Dive in and read, Alex.

    I stand corrected about Harrison, by the way, Yet, Lennon’s involvement denotes a certain level of approval.

    Harrison got some assistance in the lyrics from fellow Beatle John Lennon, who wrote a few one-liners on the song for him

    http://en.wikipedia.org/wiki/Taxman




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