Welcome to my blog where I discuss money, investing, politics, and anything else import in the world. I find it surprising that most people in their 30s have very little knowledge or interest in these areas. Of course everyone is interested in money, but very few take the time or have the discipline to properly save and invest it for the future or short term. For those who at least have the interest, I'll write about my experiences and methods of investing, and hopefully give you a head start in investing.

Tuesday, April 15, 2008

Death to Income Tax?

To take from one, because it is thought his own industry and that of his father has acquired too much, in order to spare to others who (or whose fathers) have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, "to guarantee to everyone a free exercise of his industry and the fruits acquired by it. -Thomas Jefferson

Those are the words of Thomas Jefferson on the issue of income taxes. Something to think about now that most of us have filed our taxes for 2007. Our founding fathers and, in fact, our Constitution did not allow for the collection of income taxes. The Government was funded by excise taxes, tariffs on imports, and donations from the states. The states collected primarily property, flat taxes, or import taxes. The federal Government started using income taxes on and off through 1895 to fund wars. In 1895, the Supreme Court declared the income tax unconstitutional. It took an amendment in 1913 (the 16th) to the Constitution to firmly establish the income tax as a permanent fixture in the tax code.

The income tax rate has fluctuated throughout the years, reaching as high as 91% for the top bracket in 1964. After the recent Bush tax cuts, rates are currently more moderate than those times, but still higher than the Reagan years. Now, the rate looks to be in danger of again increasing, if a Democrat wins the Presidential election.

Many have called for elimination of the income tax as they are fed up with increases in spending and increases in other tax rates. The Social Security tax cap continues to go up every year (and will be eliminated if Obama has any say about it), state taxes are increasing, and basic necessities like food and fuel are seeing high inflation. Ron Paul has been the Internet cheer leader for calling for the elimination of income tax, and although has a strong cult following, could not mount any significant momentum in the Republican primaries. Still many call the income tax system unconstitutional (which it really isn't). Flat tax and "fair tax" supporters also have been vocal, but both plans result in lower taxes for the upper income brackets, and do not lower the already low middle class rates.

Therefore, the populists tactics of the candidates prevail with battle cries to help the middle class and tax the rich. As do promises of more Government programs to support and help the country, whether it be for universal health care or money for college. There will be no relief or reduction of taxes without large cuts in programs, adjustments to social security, and reduction in Government. But when was the last time a candidate won any office by promising to do less than his/her predecessor?

No comments: