The difference between "a.s.sessing" and "levying" taxes.
Who levies the taxes in your town? county? state?
Explain the statement that "large tax values and low tax rates attract outside capital and enterprise".
TAXATION BY THE NATIONAL GOVERNMENT
We have been speaking so far of taxation, for the purposes of state and local governments. But Congress also has power by "to lay and collect taxes ... to pay the debts and provide for the common defense and general welfare of the United States"
(Const.i.tution, Art. I, sec. 8, clause i). State and local governments raise most of their revenues by DIRECT taxation upon the property of citizens. The national government, on the other hand, has always relied chiefly upon INDIRECT taxation. Congress levies DUTIES ON IMPORTS. These duties are paid in the first instance by the importer. The latter, however, adds the tax to the price of the goods, so that it is paid finally by the consumers and not by the importer. In a similar manner Congress levies EXCISE TAXES, which are taxes upon products manufactured in this country. The princ.i.p.al excise taxes have been those levied on alcoholic liquors and tobacco. But here again the tax is paid by the consumer in the price which he pays for the liquor or tobacco.
ADVANTAGES OF INDIRECT TAXATION
The chief advantage of indirect taxes is the ease and certainty with which they may be collected by the government. the citizen pays them whenever he buys the articles on which the tax is levied. The retail dealer pa.s.ses them on to the wholesaler, and so finally the importer is reimbursed. The government collects the taxes at customs houses at ports of entry, or at the tobacco factories and, formerly, at distilleries. Prohibition has deprived the government of one of its chief sources of revenue. Indirect taxes are also less objectionable to the people, for they are seldom conscious of paying them when they buy goods upon which they are levied.
FEDERAL INCOME TAX
Congress has the power to levy direct as well as indirect taxes, but it has usually avoided direct taxation, partly for the reasons stated above, and partly because the Const.i.tution provides that "no capitation or other direct tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken"; that is, in proportion to population. It has been found difficult in practice to make such apportionment. Various attempts by Congress to levy a direct tax on incomes have been declared unconst.i.tutional by the Supreme Court because it was not so apportioned. The Const.i.tution has now been amended, however, to give Congress the power "to lay and collect taxes on incomes from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration"
(Amendment XVI).
A large revenue is now derived from the national income tax. The law at first exempted from it single persons whose income was less than $3000, and married persons whose income was less than $4000.
As a result of the war, only those are now exempt whose incomes are less than $1000, if single, and $2000 if married, with an additional exemption for each dependent child. The tax is PROGRESSIVE: that is, the larger one"s income, the higher RATE one pays.
WAR TAXES
In ordinary times of peace, state and local governments together spend much more money than the national government. In war time the reverse is true. Enormous sums of money were required for the conduct of the recent war. As a result the rates of import, excise, and income taxes were greatly increased, and unusual forms of taxation were adopted. A war tax was placed upon many articles of common use, an inheritance tax was imposed similar to that in some of the states, and the EXCESS PROFITS of businesses which the war made unusually prosperous were taxed heavily. The effort in every case was to distribute the tax so that every one should do his share, while the burden should rest most heavily upon those who could best bear it.
GOVERNMENT LOANS
A large part of the money necessary for war purposes, and for permanent improvements in time of peace, is raised by borrowing.
Governments, whether national, state, or local, borrow money by the sale of BONDS, the purchase price with interest being returned to the purchaser after a stated period of years. The national government borrowed more than 22 billion dollars during the war by the sale of "liberty bonds," and an additional large sum by the sale of "war savings stamps". These loans made by the people are ultimately paid off with funds raised by taxation. The people to- day advance money to the government, which the people of to-morrow pay back by taxation. This is justifiable because the war was fought for the benefit of future generations as well as of the people to-day. For the same reason, the cost of permanent improvements, such as roads and public buildings, is distributed over a period of years.
Investigate and report on:
The full meaning of Article I, section 8, clause i, and section 7, clause I, of the Const.i.tution.
The loss to the nation of revenue as a result of the prohibition of the liquor traffic.
Compensating financial gains to the nation through prohibition of the liquor traffic.
Why an income tax is a good form of taxation. Why it should be "progressive".
The justice of an inheritance tax. Of a tax on excess profits.
Articles upon which you pay an import duty.
Why government is justified in using force to compel the payment of taxes.
READINGS
County and state reports. Local tax lists.
In LESSONS IN COMMUNITY AND NATIONAL LIFE:
Series B: Lesson 22, Financing the war.
Lesson 23, Thrift and war savings.
The United States Treasury Department; in Federal Executive Departments,
Bulletin, 1919, No. 74, U.S. Bureau of Education.
In Long"s AMERICAN PATRIOTIC PROSE:
Taxation and Government (John Fiske), pp. 249-254.
North Carolina Club YEAR BOOK, 1917-1918, pp. 49-68 (University of North Carolina Record, Extension Series No. 30, Chapel Hill, N.C.).
Tufts, Jas. H., THE REAL BUSINESS OF LIVING, pp. 52-54; 242-246 (Henry Holt Co.).
Hart, A.B., ACTUAL GOVERNMENT, pp. 381-429 (Longmans, Green & Co.).
Reed, T.H., FORM AND FUNCTIONS OF AMERICAN GOVERNMENT, pp. 468-481 (World Book Co.).
ENCYCLOPEDIA OF AMERICAN GOVERNMENT, under "Tax" and "Taxation."
Plehn, C.C., INTRODUCTION TO PUBLIC FINANCE (Macmillan).
CHAPTER XXIV
HOW WE GOVERN OURSELVES
Early in our study we considered the question WHY we have government (Chapter IV). We saw then that it is the people"s organization for teamwork in protecting and promoting their common interests. Succeeding chapters contain evidence that this is so, although they also show that the results achieved by government are by no means perfect. Now we are to consider HOW we have organized to get teamwork and how well our organization is suited to its purpose.
GOVERNMENT AS A PROTECTOR OF INDIVIDUAL INITIATIVE
"American experience indicates that what men do for themselves, on their own initiative, is better done than what paternalistic government attempts to do for them." [Footnote: Editorial, SAt.u.r.dAY EVENING POST, February 12, 1921.] Americans have always disliked PATERNALISM in government, which means an attempt on the part of government to control the personal affairs of the people as a father (Latin, PATER) controls the affairs of a small child.
Democracy is founded on faith in the ability of the people to manage their own affairs with due regard for the equal rights of other people. We look upon our government chiefly as an instrument to ensure an equal opportunity to all to exercise initiative and to manage their own affairs; or, to use the terms we have used before, not so much to do things for us, as to secure teamwork in doing things for ourselves. We have had numerous examples of this principle in preceding chapters, one of which was the extent to which private initiative and enterprise were depended upon for the development of our public lands.
GOVERNMENT AS A PERFORMER OF SERVICE
As our community life has become more complex, and as our dependence upon one another has become greater, we have gradually come to expect government to do many things for us, and to control our individual conduct in many ways, that were not thought of at an earlier time. We have had ill.u.s.trations of this, also, in foregoing chapters. For example, whereas roads were at first built and controlled almost entirely by private enterprise, now they are mostly PUBLIC highways, maintained by state and local governments with the cooperation of the national government. Proposals to place railroads under government management have always met, and still meet, with opposition; but government exercises a much greater control over them than formerly. Even education has only gradually become compulsory by law, and the "public" high school is of recent origin. Until quite recently the people have been left largely to their own resources for the protection of health, and for recreation and social life.
VIEWS OF THE SOCIALISTS