The Income Tax And How It Grew

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The income-tax agency has also tried to raise the level of its dialogue with the citizenry by quoting what is undoubtedly its favorite aphorism, the remark of Justice Oliver Wendell Holmes, “Taxes are the price we pay for civilization.” Not everyone responded positively. One taxpayer from Lawrenceville, Georgia, replied: “If we didn’t have any more tax to pay than Mr. Holmes did, we’d be happy about it, too”; and a man from Kansas City suspected darkly that Holmes didn’t pay any income tax at all. Anyway, he added, very few people in his part of the country had ever heard of Holmes except for a few Harvard graduates.

Extensively computerized since 1967, the IRS does nevertheless occasionally indulge in a human gesture. To a taxpayer who credited himself with a loss because he had had a skunk in the cellar and couldn’t evict it for a week, a sympathetic district director wrote that the episode was evidently sudden, unexpected, the animal clearly not an invitee, all circumstances that met the criteria for an allowable casualty loss. And in Philadelphia the district director for eastern Pennsylvania, hard-nosed about taxes but an easy mark for little girls, was touched when Marcia Kessler, ten, a pretty fifth-grader at Rydal Elementary School, wrote to the IRS begging the tax gatherers to stop deducting from her father’s paycheck for a week so he could buy her a pony. The office could not grant the request, but the staff clubbed together to present an enraptured Marcia with a beautiful white Welsh pony named Cotton. But the district director warned that Marcia’s pony loophole was setting no precedent: “We’re not at the mink stole or sports car stage yet. Just at the pony stage.”

Theorists have devoted a great deal of intellectual effort to justify graduated taxes on logical grounds, but the idea appeals intuitively to most people as representing a program of equal sacrifice for the general welfare. Justice Robert H. Jackson considered that the system worked reasonably well on the whole, “a reassuring sign of the stability and vitality of our system of self-government.” Despite the frailties of human nature and the crudities of the political process, there is no evidence of widespread evasion. About nine-tenths of the adjusted gross income of American taxpayers is reported, while the expenses for collecting the money are moderate—less than 0.5 per cent of the amounts collected. So though the tax can be abused through legal manipulations and pressure groups do bend it to their special interests, these tensions are acceptable, since the relation of the sliding-scale income tax to American ideas of democracy is generally sensed.

The outlook is for continuing high income taxes as an accompanying aspect of urbanization, social change, and expanding government activities that appear destined to grow relatively and absolutely. There is little evidence, however, after sixty years of experience, to support the contention that income taxation has discouraged the wealth-formation process or has reduced the buying power that our dynamic capitalistic society has placed at the disposal of the haves. We shall never be certain, so long as congressmen, senators, lobbyists, the National Association of Manufacturers, George Meany and the AFL-CIO , the Chase Manhattan Bank, and the American Petroleum Institute, continue to weave through the stately figures of their tax minuet, that we are not paying too much and someone else too little.

That is what makes the cheese so binding for this year’s seventy-seven million personal income tax payers. That is why, as Edmund Burke reminded the British Parliament in his famous speech on taxing the colonies, “To tax and to please, no more than to love and be wise, is not given to men.”