“In this world, nothing can be said to be certain, except death and taxes,” goes the famous quote by Benjamin Franklin. The Federal Tax Code is one of the most controversial issues in modern American politics. It’s a stark dividing line between our two main political parties. Republicans say taxes are too high for people to live, and Democrats say they’re too low for the government to function, as evidenced by the vicious fight earlier this year over the Tax Cuts and Jobs Act sponsored by President Trump. Federal taxes pay for everything from the military, interstate highways, health programs like Medicare and Medicaid, retirement programs like Social Security and countless other national necessities that no one wants to part with, however, it is a deeply flawed, corrupt, and unjust system that needs revision.
The Founding Fathers had very different opinions than modern Americans on the power of the Federal government, especially in terms of taxes. Hatred of taxes is the reason that the United States exist. It was in protest of taxes on stamps and other imported good that led to the Boston Tea Party and the Revolutionary War. Before The Constitution, they wrote a guiding document called the Articles of Confederation. “The first draft provided for a strong central government, but this was not satisfactory to a Congress concerned with states’ rights. In the revised draft… Congress was severely limited in its powers. It could not raise money by collecting taxes” (Articles).
Thomas Jefferson believed taxes were not just tyranny but a sin (Pappas). One of the first Supreme Court Justices, John Marshall, said, “The power to tax is the power to destroy” (Pappas). When Alexander Hamilton, the first Treasury Secretary, decided to institute a sales tax, it caused the Whiskey Rebellion, which lasted years and led to the arrest of hundreds when people simply refused to follow the law. Income tax didn’t even exist until 1913, with the passage of the 16th Amendment. The tax rate has always varied, jumping around wildly from 1% in the earliest days to 94% on certain tax brackets during the Great Depression (Beattle).
Today, the United States has several tax brackets. The U.S. uses a progressive rather than a flat tax rate. Taxpayers are taxed a higher percentage if they make more money. An American may pay a rate as low as 10% if they are poor or as high as 37% if they are in the upper class. As much as Americans complain their taxes are always too high, this is a low rate compared to other developed countries. Sweden is at 62%, and Denmark and Japan are at 55% (Erb).
The argument made for these countries’ high tax rate, as supported by the majority of the Democratic party in America, is that they get more services and benefits from their government and have a higher quality of life. Health care and college tuition are paid for, retirees are provided for, vacation time and medical leave are generous, the standard of living is high and poverty rates are low (Bloom). Democrats believe in higher taxes on the wealthy based in part on their moral principles of subsidizing the poor, the elderly, and others who struggle and might get left behind, and on the idea that governments are good for society – a selfless crusader pursuing justice in courts, protecting the environment, fighting terrorism, and so on that no individual or business could be trusted to do. They also base their opinions on an economic theory called Keynesian economics that holds that the government needs to collect money so that it can spend money and, because they think that prices tend to stay stable, this will grow the economy (Bloom).
Republicans, on the other hand, believe high taxes would, on the contrary, damage quality of life in America. Republicans believe that government is generally corrupt, wasteful, and useless in many ways–annually overspending by millions on bureaucracy, the personal projects of corrupt politicians, the promotion of biased causes, and social programs that encourage a lack of hard work. They believe government should be small and not try to compete with private businesses. They believe lowering the tax rate would stimulate the economy because having more money in their pockets would make businesses and individuals more likely to shop and spend, thereby stimulating the economy. No one needs the government to spend Americans’ money buying things Americans don’t want. They believe private individuals and companies and the marketplace can manage themselves without the interference of government, as well as the theory of trickle-down economics which holds that cutting taxes on the wealthy and on corporations should be encouraged because if businesses are doing well, there will be more hiring and more spending that will lift up the economy (Gleckman).
Earlier this year, Republicans in Congress passed the Tax Cuts & Jobs Act (TCJA) without a single Democratic vote. The new law declares that the corporate tax rate will be “reduced from 35 percent to 21 percent for the 2018 tax year and thereafter” (Battersby). Among other things, the bill helped to lower taxes for millions of Americans and reduced the Estate Tax, resulting in “personal tax cuts in 2018 estimated at roughly $122 billion, with corporate tax cuts estimated at approximately $83 billion” (York). There has been loud controversy ever since, with
Democrats saying that this will bankrupt the country and that is perversely unfair that corporations will save millions while the average family of four will save an estimated $1000 a year, and that citizens’ tax cuts are temporary while corporations’ are permanent and that the damage to the economy from this will wipe out any savings (Weigel).
The Tax Cuts and Jobs Act, however, is good and beneficial to the majority of Americans. Everyone gets a tax cut and more money in their pocket at the end of the year. They can spend this money or save it, improving their quality of life and helping them feel more secure in their finances. The government isn’t giving back as much value as it is seizing from the American taxpayer. The Republican position that the tax rate stimulates the economy is more firmly supported by the data. Private individuals and companies can manage themselves in the marketplace without government’s wasteful and unnecessary interference.
The epitome of this plan is seen in the policies of the Republican President Ronald Reagan, named Reaganomics, is based on tax reductions and and unrestricted free-markets. He cut the tax rate among individuals from 70% to 28% , and the corporate tax rate from 48% to 34%. By the end of Reagan’s second term, tax revenues, despite the rate cut, had nearly doubled from $517 billion to $909 billion. Inflation and unemployment also declined significantly, adding over forty million jobs (Amadeo). The Dow Jones Industrial Average grew 14-fold, “usher[ing] in one of the longest and strongest periods of prosperity in American history” (Amadeo).
Everyone, no matter their party, would like to live in an American utopia where the government gives people everything they want, people hardly have to work, and everyone is happy all the time, but there are a lot of reasons this will never happen. A strong free-market system, as desired by the Republican party, with reduced taxes can lead to problems of income inequality, over competitiveness, and people being left behind, but it is still the better of the two ideas. A socialist government with increased federal taxes and increased federal control, as desired by the Democratic party, has historically, as in Russia, led to corruption and, in extreme cases, something that much more resembles a dystopia (Thangavelu).
The Federal Tax Code is imperfect, and there is much that can be done to improve it. There is a great deal of unfairness that could be dealt with. Income inequality has been increasing in the United States since the 70’s (Cooper). This is partially caused or at least exacerbated by a corrupt tax system. “The gap between the amount of U.S. federal taxes paid and the amount of tax owed is staggering—over $450 billion per year” (Cecil). Everyone knows people cheat on their taxes through tax shelters, shell corporations, suspicious write-offs, and other acrobatic accounting tricks.
Some billionaires pay a lower tax rate than people in the middle class (Cecil). This is another area where all parties agree. According to a recent IRS survey, 93% of Americans believe there should be punishment and accountability for those who cheat on their taxes (Cecil). This is the real problem that needs to be addressed. Taxes are artificially high to account for cheating just as prices at the mall are inflated to account for shoplifters. If people were paying their fair share, Americans could likely to a friendlier agreement on what the rate should be.
Anarchy, dissolving the entire government and the tax system entirely, is no one’s solution. The government performs important and necessary work, from schools to military to healthcare and beyond. The Federal Tax Code is flawed, but the solution is not to increases federal taxes and federal involvement in the market, which leads to waste and corruption. The solution is complex but a good place to start is to streamline and enforce a reasonable tax code, trusting the market and the American people to know the best way to spend their own money. As Winston Churchill once said, “For a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle” (Pappas).
Works Cited
- Amadeo, Kimberly. “Would Reaganomics Work Today?” The Balance, ———www.thebalance.com/reaganomics-did-it-work-would-it-today-3305569.
- Amy, Douglas J. “Government Is Good.” Government Is Good – Taxes Are Good, ———-governmentisgood.com/articles.php?aid=17.
- “Articles of Confederation.” Funk & Wagnalls New World Encyclopedia, 2017, p. 1p. 1. ———EBSCOhost,search.ebscohost.com/login.aspx?direct=true&db=funk&AN=AR151200&si———te=eds-live.BATTERSBY, MARK E. “Breaking down the TAX CUTS & JOBS ACT.” ———Pit & Quarry, vol. 110, no. 8, Feb. 2018, p. 64. EBSCOhost ———search.ebscohost.com/login.aspx?direct=true&db=aqh&AN=127970700&site=eds-live.
- Beattie, Andrew. “A Short History Of Taxes.” Forbes, Forbes Magazine, 19 June 2013, www.forbes.com/2010/04/14/tax-history-law-personal-finance-tax-law changes.html#640c6d581cf8.
- Bloom, Ester. “Here’s What Norway and the Other Happiest Countries in the World Have in ——–Common.” CNBC, CNBC, 12 Jan. ——–2018,www.cnbc.com/2017/08/09/the-happiest-countries-in-the-world-also-pay-a-lot-in-ta———xes.html.
- Cecil, H.Wayne, and Teresa A. King. “Understanding the Federal Tax Gap: A Closer Look at ——-Declining IRS Enforcement Activities.” CPA Journal, vol. 87, no. 10, Oct. 2017, p. 38. ——-EBSCOhost,search.ebscohost.com/login.aspx?direct=true&db=aqh&AN=125734036&site——-=eds-live.
- Cooper, Daniel H., et al. “The Role of Taxes in Mitigating Income Inequality across the ——–U.S. States.” National Tax Journal, vol. 68, no. 4, Dec. 2015, p. 943. EBSCOhost, ——–doi:10.17310/ntj.2015.4.03.
- Erb, Kelly Phillips. “The World Cup Countries With The Highest (And Lowest) Tax Rates.” ——-Forbes,Forbes Magazine, 13 July 2018, ——-www.forbes.com/sites/kellyphillipserb/2018/07/13/the-world-cup-countries-with-the-highe——-st-and-lowest-tax-rates/#32f4ae9d1f10.
- Gleckman, Howard. “What the GOP Platform Says About Taxes.” Tax Policy Center, 19 July ——2016,www.taxpolicycenter.org/taxvox/what-gop-platform-says-about-taxes.
- Pappas, Peter. “The Tax Lawyer’s Blog – Founding Fathers Quotes on Taxes and Govern…” The ——Pappas Group, 24 Apr. 2010, ——www.pappastax.com/founding-fathers-quotes-on-taxes-and-government/.
- Thangavelu, Poonkulali. “Can Socialism Work In America?” Investopedia, Investopedia, 14 May ——-2015, www.investopedia.com/articles/investing/051415/can-socialism-work-america.asp.
- York, Erica. “Tax Cuts and Jobs Act Simplified Filing Process for Millions of Households.” Tax ——Foundation, Tax Foundation, 27 Sept. 2018, ——taxfoundation.org/the-tax-cuts-and-jobs-act-simplified-the-tax-filing-process- ——for-millions-of-households.
- Weigel, David. “Democrats Build Case against Tax Bill but Don’t Call for Repeal.” The ——Washington Post, WP Company, 26 Dec. 2017, ——www.washingtonpost.com/news/powerpost/wp/2017/12/26/democrats-build-case- ——against-tax-bill-but-dont-call-for-repeal/?utm_term=.9029d6c25e63.
