“The Economy” and the Taxpayer 

“Would a tax cut be good for the economy?” Economists are having their usual eye-glazing debate over this question, without bothering to define their terms. The Bush administration wants to cut taxes a little tiny bit over the next decade, insisting it will help “the economy”; their opponents say that even a little tiny tax cut could hurt “the economy.”

What do they mean by the economy? Is it a single thing, or a whole lot of disparate things lumped together into a misleading abstraction?

The first thing to notice is that Americans didn’t use to talk this way. In the first century of the U.S. Government’s existence, when Federal budgets were in the millions, not trillions, taxes were very low, the country prospered as no other country had, individual freedom was unprecedented, and Europeans flocked here. There was no welfare state; the immigrants didn’t come to live off the taxpayer, but to reap rewards for their own efforts in a system of free exchange. Nobody spoke of a monolithic “economy” as the government’s concern.

During the Civil War the Lincoln administration imposed the first national income tax. The rates were low, 3 to 5 per cent. After the war the tax was ruled unconstitutional. Eventually the Sixteenth Amendment, ratified in 1913, gave the Federal Government a court-proof power to impose taxes on income. But the rates were still, at first, low: a single man with no dependents had to make $50,000 a year (in today’s money) before he paid 1 per cent in taxes. The top rate was 7 per cent.

Prescient voices warned, however, that the Amendment gave the Federal Government a potentially limitless power to tax; moreover, it created new possibilities of tyranny, by making every U.S. citizen directly answerable to the Federal Government for his personal finances. An intrusive bureaucracy would result, eliminating privacy.

The worst scenarios have been surpassed. Today the ordinary taxpayer pays at rates higher than the Rockefellers and Morgans used to pay. Add in state and local taxes, and we now pay nearly half our income to the government. This is to say nothing of downright illegal abuses, like using the tax bureaucracy to target political opponents of presidents. And the Federal courts have ruled that the taxpayer, in his dealings with that bureaucracy, doesn’t enjoy the full protection of the Bill of Rights against unreasonable search and seizure and self-incrimination.

If Americans had realized what the Sixteenth Amendment would entail, it would never have been ratified. It has inured us to a new form of “involuntary servitude” — not to private masters, but to the government. The courts have never recognized taxation, however onerous, as “involuntary servitude” as forbidden by the Thirteenth Amendment. So even if the government took all your earnings, you wouldn’t be, in its eyes, a slave!

Such matters, alas, don’t interest the economists who tangle themselves in arguments over whether a tax cut would be “good for the economy.” They have no criteria for judging whether taxes are unjust to the people who pay them. They acknowledge no moral limits on the taxing power. They only know it can be dangerous to “the economy” to let people keep too much of their own money. In principle, all our earnings seem to belong to the government. And pragmatic “experts” are at hand to warn it against excessive generosity to us.

Perish the thought that the government already takes far too much from us, that it spends our money for unconstitutional purposes, that it heaps debt on politically defenseless future generations. The Sixteenth Amendment is one of the few parts of the U.S. Constitution the government still takes seriously, construing its taxing power as broadly as possible — so broadly, in fact, as to nullify the rest of the Constitution.

A century ago Hilaire Belloc predicted the emergence of “the Servile State” — a social order in which some men are systematically forced by the state to support others. That is what a limitless taxing power leads to, and has already led to: a “soft” servitude, in which liberty is hardly more than a legal fiction and the slaves of the state barely sense what they have lost.

How unfair of Bush’s opponents to accuse him of trying to restore too much of our freedom! Even if he gets his way, there is no danger that Americans will be as free as they were in 1913. Neither party wants that.

Joseph Sobran