Let’s keep this one real simple. According to the Constitution, the Congress has the power to tax the people. According to: Section 8. Clause 1. “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” The 16th Amendment then loosened things up by making it clear that while Congress was still required to lay any income taxes in a uniform manner throughout the states, it could spend the funds in a non-uniform manner.
Since the Constitution doesn’t really limit Congress in its ability to extract taxes from the citizenry, by what means can the public limit Congress from taking from the people most of their worldly possessions and most of their income? First, there is the power of the ballot box, theoretically the ultimate power of the citizenry. If Congress levies too many taxes or spends the tax income unwisely, in theory, the public will vote them out of office. This threat is hoped to be sufficient to keep Congress under some control. And, like the Colonists in the 1870s, if the burden of taxation becomes too great or the use of the taxes becomes too capricious, the citizenry can always revolt.
My personal opinion is that our Federal Government taxes us too heavily and spends much, if not most, of the tax revenue unwisely. I may be wrong, but it is also my belief that most Americans agree with me. Many suggestions have been made over the years to reform our tax system: Flat Tax, Value Added Tax, Pay as you go Tax, etc. Mostly, however, Congress has decided to create new programs (requiring more taxes or debt) and has used tax policy to do the social engineering they want. The end result is a tax code so complex and so convoluted that even the majority of IRS experts disagree on the application of the code. “Two decades ago, Ralph Nader’s Tax Reform Research Group prepared 22 identical tax reports based on the fictional economic plight of a married couple with one child. Identical copies were submitted to 22 different IRS offices around the country. Each office came up with an entirely different tax figure. Results varied from a refund of $811.96 recommended in Flushing, N.Y., to a tax-due figure of $52.13 demanded by the IRS office in Portland, Ore.,” according to Jeff Schnepper at MSN Money.
So what should we do about taxes? What do you want your Congressperson to push to reform our Federal Tax System? Or, do you like the status quo?
Here’s what I want to see. I’ll warn you that it is radical and would create complete structural change. It would also help put people in touch with how much tax they actually pay. Eliminate withholding. When tax withholding was instituted in World War II, it changed our system completely. 4 Million Americans paid income taxes in 1939, before the war. In 1943, the Current Tax Payment Act was passed that instituted employer withholding of income taxes. In 1945, 43 million (more than ten times as many) Americans were having income taxes withheld. Withholding is painless. Imagine if everyone had to write a check, just like paying his or her Utility bill, to the IRS each month. I think people would better understand just how much they send to Washington. They might even demand that their Congressmen and Senators spend the money more wisely. It might have the side benefit of making it much harder to use tax policy as a social engineering tool.