How did it become “fair” for an American family to give to government a third of its income? How did it become “fair” for an American family to give to government half of its income?
When Parliament passed the Stamp Act in 1765, Americans had never before experienced direct taxation. They rebelled. In 1767, Parliament passed the Townshend Acts, which levied taxes on an array of British goods. The colonists responded by boycotting British imports. Parliament repealed most of the Townshend Acts in 1770 (except the tax on tea), and in 1773 passed the Tea Act, which essentially told Americans they had to buy their tea from the East India Company through government-approved merchants. Though the act actually lowered the cost of British tea, Americans were so outraged at Britain’s assertion of authority that they forbade tea-bearing ships from docking. And, of course, in Boston they threw 342 chests of tea into the harbor.
All of these taxes, by the way, were passed to finance the British Army. The newly independent United States taxed its people directly to pay off the war and ongoing conflicts with France, but in 1802, under President Jefferson, all direct taxation upon the American people was ended. That lasted for a decade, until we had to finance the War of 1812. That war was paid off by 1817, and Americans experienced no direct taxation from their federal government until 1861.
That means that “Manifest Destiny,” including James K. Polk’s war with Mexico, and the expansion of the country from coast to coast, was financed without a single direct federal tax being levied upon the American people.
The federal income tax imposed to finance the Civil War had two tax brackets — 3 percent and 5 percent — and was repealed in 1872. It remained off the books until 1913, when the 16th Amendment was ratified. The federal income tax rates in 1913 ranged from 1 percent to 7 percent. That highest rate applied to people earning $500,000 a year or more. Today, a married couple earning that much would pay a federal income tax rate of 35 percent, and with all taxes combined could pay more than half their income in taxes.
The greatest tax outrage in American history is Washington’s gradual convincing of the American people that giving so much of their income to the government is just and fair.
Our forefathers rebelled over taxes that amounted to pennies per item, and two centuries later we fork over 40 percent of our income and call it “fair.” The excise taxes and import duties that financed Washington for more than a century were not sustainable. A new tax system was needed. But in the century that followed its adoption, it changed the American people themselves.
Americans today are taxed at levels most of our forebears would have considered unthinkable. By our own nation’s historical standards, we are outrageously, insanely overtaxed. And yet we shrug our shoulders and say, well, at least we’re not France.
By the way, France’s top marginal tax rate is 40 percent. President Obama plans to raise our top marginal rate to 39 percent.
As Samuel Adams, organizer of the Boston Tea Party, said in his famous speech in Philadelphia in August of 1776, “When the spirit of liberty, which now animates our hearts and gives success to our arms, is extinct, our numbers will accelerate our ruin and render us easier victims to tyranny.”
Shane Pollock says:
Great history lesson! One thing to remember is during the times of no direct taxation our country was a leading exporting of goods. This helped finance our country. What percentage of goods do we export today compared to 150 years ago or even 50?
Another issue is that not every American is paying taxes. A new tax system has been needed for a long time. I am all for a Fair Tax. Why not put a federal tax on all the items you purchase. This will ensure each person living in the United States will pay taxes.
I think of our constant tax increases like a frog sitting in a pot of water over a stove. As the water continues to heat up the frog doesn’t pay much attention until it is boiling. If the water was boiling when the frog was put in he would be more likely to jump out. We are sitting in the pot of water right now just watching it heat up. Who knows what will happen when we finally realize the water is boiling.
April 15, 2009 — 12:37 pm
Bruce Hahn says:
No one likes to pay taxes, but current net U.S. income tax rates aren’t so bad compared to those of most other developed countries. Thanks to mortgage interest and numerous other deductions and preferences, an average U.S. couple earning $500k pays $110,000 in fed taxes (a 22% effective rate). Thank goodness that most of us who earn far less have even lower effective tax rates.
It would be great if the federal government could end wasteful programs and reduce out taxes further, but at least the ridiculus marginal rates (at one point as high as 90%) are long gone, and we still have the mortgage interest deduction.
April 15, 2009 — 2:15 pm
Sean Purcell says:
Bruce,
I appreciate your thoughtful comment, but I have a hard time with the premise. If you were to say “Hey, this guy keeps hitting me in the head with a hammer” would you be comforted by someone pointing out that at least he’s no longer kicking you in the groin too?
It’s the very concept of income taxes that are wrong. To discuss the relative merits of various rates only reinforces the underlying evil. This is an old joke, but apropos:
April 15, 2009 — 4:11 pm
jay seville says:
I had the priviledge (sp) of speaking at the DC tea party. Too bad some of my intellectual points of why economic liberty is crucial to maintaining freedom or being able to voice and fund dissent.
http://www.justnewlistings.com/dc-tea-party.html Passionate with no teleprompter.
April 16, 2009 — 7:41 pm
John says:
Hey Jay:
Great job. I attended the Fort Lauderdale Tea party which drew about 3-4,000.
April 17, 2009 — 1:14 pm