Disparities in intellect, physical abilities, education, opportunities, motivations, power and luck result in vast inequalities of income and wealth. Should we collect more taxes from those who have less (because there are more of them), or should we collect more taxes from those who have more (collecting more from the fewer who are able to bear the burden)?
We have a social consensus that taxes should be efficient, universal, progressive, and fair. But "fair" is an elusive and unstable concept, and it's especially wobbly in the hands of people like Governor Sam Brownback of Kansas, or the GOP majority in Congress today.
In ancient Egypt, tax collectors were known as scribes and they collected taxes on such things as cooking oil. Scribes audited the use of cooking oil by households and required the use of certain cooking oils. In classical Greece the Athenians attempted to foist their tax burden on foreigners through a poll tax on non-Athenians, called a metoikion. They imposed a universal tax on all Athenians, called an eisphora, only in times of war. The Romans levied customs duties on imports and exports, a portoria. Ceasar Augustus delegated the burden of tax collection to cities and provincial governors, making many of them rich. He also imposed an inheritance tax to pay for the retirement of soldiers. The tax was five percent of all inheritances, except gifts to children and spouses. Julius Ceaser imposed a one percent sales tax.
In England, the King's Writ (a letter dated June 20, 1215 from King John to the Sheriff of Gloucester, announcing the signing of the Magna Carta) stated that individuals should be taxed according to their status and means--embodying an early expression of the principle of progressive taxation.
During the English Civil War, Parliament imposed excise taxes on grains, meats, and vegetables in order to pay for Oliver Cromwell's army. These taxes were very regressive and fell mostly on the poor, leading to riots in 1647. An early income tax was introduced by Britain in 1800 to pay for the Napoleonic wars.
In the United States, Congress imposed its first income tax in 1861 to fund the Northern Armies in the Civil War (3% of all income over $800.00). This tax was rescinded in 1872. A new income tax was introduced in 1894, but the following year, in Pollock v. Farmers Loan & Trust Co., the Supreme Court struck down all unapportioned direct taxes (according to political representation in Congress) on income, bonds, and dividends as unconstitutional. The decision was overturned by the adoption of the 16th Amendment to the Constitution in 1913, and the Federal government has relied heavily on income taxation to fund its operations ever since.
States, by contrast, even though they have had the power to directly tax citizens from the start, have relied more on property taxes and sales taxes.
One of the advantages of sales taxes and property taxes over income taxes is they are a more stable sources of revenue. At the regional (state level) economic performance and individual income can fluctuate significantly, and this poses budgeting difficulties for states. On the other hand, a heavy reliance on property and sales taxes is regressive--the burden falls more on the poor.
In Kansas, the less money you earn, the more you pay to the state in taxes as a percentage of your income. The bottom 20% of earners pay approximately 11.8 percent of their income to the state in taxes; the richest 20% of earners pay approximately 4.8 percent of their income to the state in taxes.
Take a look at this chart in today's Washington Post.
A large factor in this, of course, is that a lot of state tax revenues (and in Kansas more so than in other states) is based on sales taxes on essential goods and services. Poor people and rich people pay a similar amount to purchase food, but this represents a much bigger portion of income for someone with $20,000 of income than for someone with $400,000 of income.
Under governor Brownback, in 2012 Kansas enacted large cuts in the income tax, and it eliminated state income taxes for business profits realized as non-wage income, both reducing state revenues and making Kansas taxation more regressive. These income tax cuts resulted in substantial budget deficits, affecting core government service, particularly in education. Those who were able did not pay, and the needs of many went unmet.
The rationale offered for these tax cuts was a fiction: that they would serve as an elixir for the Kansas economy. But that elixir had no buzz. From the end of 2012 to early 2016, the Kansas GSP grew at half the national rate, K-12 schools were forced to close early due to lack of funds, and universities suffered under funding cuts. In order to balance the budget, the state was forced to divert hundreds of millions of dollars from state highway funds. Pot holes went unfilled. The state's credit rating was downgraded twice. And after all that, as of March 2017, Kansas was staring down a $1.1 billion budget hole. That is a deep hole in light of expected tax revenues for fiscal year 2017 of just $5.6 billion.
Sam Brownback is no Pol Pot, but he is bad news for Kansas.
Kansas is not getting economic growth from its regressive taxation scheme. Mostly what it gets is greater income inequality, and poor levels of care for the bottom half of society. Brownback didn't help matters when, for ideological reasons, he turned down the federal expansion of Medicare, leaving 10 percent of the Kansas population without health insurance, four percent higher (126,000 in total pop. of 2.9 mill.) than if Kansas had accepted the Medicare expansion under Obamacare.
The Kansas experiment in regressive taxation didn't work out so well.
At the national level, reports the Congressional Budget Office, "federal taxes are progressive, meaning that average tax rates generally rise as income increases." Households in the lowest income quintile paid about 3 percent of their income in taxes, the middle quintile paid about 13 percent, and households in the highest quintile paid about 26 percent.
These rates are not so high for what we get. We have the ability.
We may live in a post-communist world, but "(to collect) from each according to his ability, (and to provide) to each according to his need" is and will always be a primary function of government. It's as true today as it was in 1875 when Karl Marx coined the phrase.
It's a concept that Kansas seems to have lost track of.
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