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Render Unto Washington

April 16 2002

With the same surety as we mark the first day of spring or the Fourth of July, Americans have named today, affording April 15 inevitability equal to seasons’ march or history’s sweep. But the notion that we should sign 38% of our incomes over to the government is relatively recent and -- proverb to the contrary - scarcely certain.

For America’s first century, the government filled its coffers with tariff revenue, excise and property taxes. Growth rates surged and the federal budget ran a healthy surplus, mostly because the government didn’t have much to do. A tax on commodities, as the framers intended, constrained bureaucracy to their meager dimensions and contained within itself a check against abuse. As Alexander Hamilton wrote, “It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.” Conversely, with direct taxation, “no limits to the discretion of the government are to be found in the nature of the thing.”

With the exception of a tax on the North levied during the Civil War, the Republic’s first generations believed income belonged to its earners, and Washington contented itself with small change. “What farmer, what mechanic, what laborer ever sees a tax-gather of the United States?” Thomas Jefferson asked in his second inaugural address. The answer, then none, is now every.

The shift began in 1893 when a drop in United States gold reserves triggered a national depression. The federal government faced its first budget deficit in 28 years, and President Grover Cleveland asked for “a small tax upon certain investments.” Congress answered with the Income Tax Act of 1894 - a 2% tax on annual gains over $4,000. Had the levy been motivated solely by financial reasons, it might have been repealed when the budget turned black. But the national mood favored a different sort of balancing act.

As regional differences and income disparity increased, the Populist Party found a political booster rocket in the possibility of punitive taxation. Pitting “rich man’s income” against “poor man’s sugar,” they succeeded in shifting the public conception of taxation from revenue collection to social justice. Said Populist Representative Thomas Hudson during the income tax debate, “The Majority of the very wealthy are haughty, overbearing, autocratic, mean, and it is that class in particular that the income tax is designed to reach.”

In 1895, the Supreme Court deemed Congress’ action unconstitutional, but the damage had been done. The Court was seen as shielding its wealthy cronies - “the triumph of selfishness over patriotism” ran one editorial. Bypassing the justices, in 1909, the Senate Committee on Finances proposed a constitutional amendment which read, "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived…” The states ratified, Congress levied, and President Woodrow Wilson signed the first income tax law in October 1913. Rates ranged from 1-7%, and 90% of the population were spared.

Between 1913 and 1940, the government’s demand remained under 2% of GDP. But with the onset of WWII, revenue needs rose to 8% of GDP - and have never receded.

At present, the average American household pays twice what it did just 15 years ago, while each wage-earner spends five months of each year in Uncle Sam’s employ. Installing a Republican president should have eased the strain, but this morning’s Washington Post reports, “The Bush administration is poised to complete the biggest increase in government spending since the 1960s' ‘Great Society,’ the result of conducting the war on terrorism while substantially boosting the education and transportation budgets.”

And so we trudge to the post office to file our returns - as if our money was the government’s all along and is simply going back to its natural home. But the irony runs much deeper: Our tax system requires an ever-growing state to administer it, and that state requires ever-growing tax revenue to sustain itself. No majority of politicians can say otherwise, because they win elections by bribing us with our own money.

Can that cycle be broken? Most definitely, for things have not always been this way. But change becomes less likely with the passing of each April 15. The annual event legitimizes it in the public mind -- makes us think there’s no alternative. The state grows, the citizen contracts, and after another generation of Tax Days, we’ll find ourselves that much more accustomed to being acted upon -- and far too spiritless to even think of hefting tea into Boston Harbor.

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