Soon Americans will be filing their 20016 Tax forms with considerable angst, having lost tremendous amounts of their incomes due to Obama Care, they dread having to pay more taxes. Being one of those people, I wonder how the heck we got here- this website follows that investigation.
Tax Statues- History and the Evolution of Taxes
From the advent of organized civilizations, taxes were inevitable. Usually taxes paid for the ruling class to govern the peasant communities or to support a standing army. War and Taxes are one of the oldest outcomes of community, but without a community people were open to enslavement, constant harassment, and death. The early civilizations were based on agriculture so taxes were collected out of foodstuffs that the peasants produced or a portion of their labor commanded by the ruling class. Some rulers took young boys and girls from amongst the peasants to serve within their houses when their parents didn’t pay taxes.
Evolution of Taxes in Civilizations with foreign trade.
It feels as though the statement by Benjamin Franklin “There are only two things certain in life Death and taxes” is as accurate today as it was then.
Most people in the USA dread figuring out the end of year tax forms as they are complex, ever changing, and generally increasing what we owe. In this complex world, with so many special interests vying for our tax dollars, our helplessness to have any say in how the collected money is spent seems insurmountable. However, tipping points do occur and they are called change elections in the USA.
Many times, excessive or a perceived unlawful tax has changed the course of history. Taxes have also been used by Government to control people or to advantage one company over others- this has happened in modern times as well as the far past.
British monarchy, King Charles 1st felt that by the divine right of being king he could govern as he desired so he levied taxes without parliamentary consent. The English Parliament, became enraged by his disregard for their authority, and viewed him as a tyrannical absolute monarch. Eventually this dispute culminated in a civil war between King Charles’s supporters, and the armies of the English and Scottish parliaments. After many battles between the foes, Oliver Cromwell’s New Model Army, in 1648, had taken control of England, defeated the Royalists, took charge of King Charles 1st, found him guilty of high treason and executed him. The execution of King Charles caused the abolishment of the Monarchy for the next 11 years 1649 -1660.
The Boston Tea Party
The Tea Act passed by the British Parliament on May 10, 1773 gave the British East India Company Tea a monopoly on tea sales in the colonies, and was the last action in a series of unpopular policies and taxes that lit the fire of rebellion in the already angered colonists. The Tea monopoly undercut the businesses of American merchants as it allowed the British East India Company to sell its surplus tea at a much lower price in the American colonies. This was in order to alleviate the massive amount of debt accrued by the company due to required tax payments to the British Government.
December 16, 1773 on a winter night between 7:00pm and 10:00pm, hundreds of men hailing from all levels of colonial society forced themselves aboard 3 ships in the Boston Harbor disguised as Mohawk Indians, and destroyed more than 300 chests of tea by dumping them into the Harbor. These Men were members of the Sons of Liberty a group who organized to defend America from the British’s overreaching Taxation without Representation proclivities. Right after the event, most of the protesters fled the area to avoid capture. Thousands witnessed the event, and it is imprinted as a major act of political defiance in our collective history- never to be forgotten as the subject is covered in most elementary schools.
The TEA Party Movement.
The Tea Party Movement had its beginnings in the growing dissatisfaction of many Americans at the intrusion and overspending of big Government. When Barack Obama’s administration announced plans to give financial aid to bankrupt homeowners, A CNBC reporter Rick Santelli went off on a rant about the government’s support of fiscal irresponsibility to particular homeowners unable to pay mortgages for homes they couldn’t afford in the first place. He declared Americans didn’t want to pay for their neighbor’s bad financial decisions, and declared that America needed a new kind of Tea Party.
Most people however in modern civilizations do understand the need for taxes to provide for the common good, infrastructure, education, and to protect the rule of law. Our complex society has taken that idea much further now taxes pay for many other projects such as health care, welfare, social security, Job and Family Security, Science Programs… Our Taxes have evolved basically into 3 categories:
Income taxes- meaning individual income taxes, payroll taxes, corporate income taxes, and capital income taxes.
Consumption taxes- meaning general sales taxes, and taxes on certain goods and services such as excise taxes on gasoline, liquor and cigarettes- this is also called a Sin tax for some items.
Wealth taxes- meaning property taxes on homes, cars, land, and death taxes (inheritance taxes).
It seems government is a rapacious beast that is never satisfied always trying to come up with some other way to gain funds. More funds to squander on special interests, good works or to redistribute wealth. Lately, the American Government never seems to stay within its budget. Government just borrows more money when it overspends sending the debt down to later generations. The Individual, unlike the Government, must stick to a budget or there are consequences of bankruptcy, repossession of property, and garnishment of wages. Some believe, Government should be in the Cradle to Grave oversee of their citizens while others believe they should be as unobtrusive as possible. The cost of one ideology far outstrips the other.
There are all sorts of differing opinions of the degree of what needs or comforts should be covered by the Government. One outcome is certain- the more social services a Government offers the more taxes are needed, causing the income classes to tighten.
USA Tax History
The USA started developing a tax base when congress was given the right to tax in 1787 during the establishment of the Constitution with the first tax being the estate tax enacted in 1797 before that they collected tariffs on whiskey and for a while on glass windows. States and localities collected poll taxes on voters and property taxes on land and commercial buildings. There are state and federal excise taxes. State and federal inheritance taxes began after 1900, while the states but not the federal government began collecting sales taxes in the 1930s. The Unites States imposed income taxes briefly during the Civil War and the 1890s, and on a permanent basis from 1913
The Constitutional Convention took place in Philadelphia on May 14 1787. It was called to discuss possible improvements to the Articles of Convention (United States Constitution) deciding how the Government will be held in check so as not to end up with a king again, and to enumerate the powers of each branch of Government. During this time, many of the Southern delegates felt they would have a heavy burden should the new government impose export Taxes so it was understood that they would not sign the Constitution if a Clause stating the prohibition of export taxation was not added. Thus, we have The Export Taxation Clause.
The Constitutional Convention in 1787 did bring finical stability to America, which was having a very difficult time trying to pay the nation’s war debt. The establishment of the Constitution in 1787 regulated trade and commerce, created a common market, common currency, consolidated and funded the national debt, started a national bank, and gave Congress the authority to tax in order to create national finances.
Value Added Tax (VAT)
We do not have taxes on trade between states, taxes on charities and religious bodies, and no value-added taxes. A value-added tax is much like a flat tax collected at the consumer’s point of purchase, but greatly reducing the incidence of tax evasion as the tax starts at moment of conception or rather development of product. It is invoice-based as each seller in the product chain includes a VAT tax charge on the buyer’s invoice giving producers a direct economic motivation to report the tax so the buyer at the end point of sale ends up paying all taxes. This disallows evasion of taxes by selling under the table to consumers without adding taxes because the taxes are already marked on the invoice.
Manhattan, New York has a high sales tax rate of 8.875%, and I can remember, while on a visit to New York City, the owners of a New York Gift shop offering us a no tax rate if we paid with cash. Not wanting to get in trouble with the law we declined the tax-free buy, but how many people take the opportunity to get it for less- the VAT tax would be a work around for this situation.