A Goose to be Plucked

The commentary below, by Phyllis Hunsinger, was first printed in The Business Times in February, 2022.

Jean Baptiste Colbert, Louis XIV’s financial minister, is credited with saying, “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.”

A tax is defined as a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. Taxes have been levied for thousands of years; the Bible refers to tax collectors. The U.S. Constitution gave Congress the “power to lay and collect taxes, duties, imposts and excises.”

The first federal income tax was created in 1861 during the Civil War as a mechanism to finance the war effort. The federal income tax became permanent in February 1913, when the Sixteenth Amendment to the Constitution was ratified, granting Congress the power to tax personal income. Federal income taxes are just one component of the federal tax system. Many of the taxes imposed today were created in the 1920’s and 1930’s such as Social Security tax, estate tax, and gift tax. Sin taxes are popular with government leaders to tax behaviors not deemed admirable, such as taxes on cigarettes, alcohol, and marijuana. A tax on gasoline was implemented in 1932 when President Hoover declared a need for more revenue to run the government.

The federal government taxes investment income. This tax is particularly counterproductive because investment is necessary for economic growth. It is not a challenging intellectual exercise to see that improved economic growth results in more tax revenue, but investment income is taxed anyway. Dividends do not escape the tax bite; these have been taxed continually since 1954.

The main objective of taxation is to fund government expenditure at the city, county, state, or federal level. Governments have no way to raise money without first taking the money from its citizens. City, county, and state level governments are equally able to enact clever methods for raising more revenue through taxation. A state income tax was first enacted by Wisconsin in 1911. Today there are only eight states without a state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. A sales tax was first enacted in West Virginia in 1921. Today Alaska, Delaware, Montana, New Hampshire, and Oregon are the only states without a sales tax. Some cities across the nation will begin taxing disposable plastic shopping bags at convenience, grocery, and drug stores. Governments desiring to control citizen behavior, taxing unfavorable activities seems a win-win.

Often taxes are taken from paychecks before the wage earner ever sees the earnings, thus taxpayers do not realize how much of their hard-earned money is seized by the government. Once enacted, a tax does not go away, the rate is simply raised. Each year the total tax burden becomes more onerous. As President Reagan said, “We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.” Now the U.S. debt is 29-trillion, 700-billion dollars and growing each minute. This debt translates to each taxpayer owing over $240,000.

As in the analogy of the goose, unless there is hissing from the citizens coupled with action, government entities will continue to tax beyond your ability to pay. It is past time to get involved. Call your congressman. Vote for legislators who will work to help individuals keep more of their own money.

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