by Michael Greaney

Created on: February 01, 2008

Proposals to eliminate taxation should be viewed with great suspicion. The fact is that most Americans lack significant private property in the means of production. They therefore lack the political power that inevitably accompanies ownership of capital. The income tax is thus the only means the great majority of people have to control their government and render it accountable to the citizens who are, presumably, sovereign.

To understand this, we need to know a little of the history behind the institution of the income tax.

When the United States was reformed in 1789 after the weaknesses in the Articles of Confederation became apparent, most taxpayers were property owners. They did not realize the bulk of their income in the form of cash, but in goods and services. Until 1857, in fact, there was less than one piece of gold or silver coin per person minted in the United States. Even then, most of the gold and silver coin went to export, as the bimetal ratio used in the United States was different from that in Europe. This made it profitable to export native gold and silver, and import foreign coin, legal tender in the U.S. until 1857, the year of a massive monetary reform. The chief use for coin was to pay taxes on property, and coin was so scarce anyway that many states would accept commodities. Most commercial transactions were "in kind," that is, goods and services were traded, rather than currency changing hands.

It thus made sense in the new Constitution to prohibit taxation of income. Most people did not have cash income to tax, nor was income generally valued in terms of money, thus obviating being objective about the value of a family's income. Trying to come up with a fair valuation each year for what a family produced on its subsistence plot in order to tax it justly would have encouraged massive abuse and corruption. Property owners would have bribed tax assessors to get a lower valuation, while tax assessors would have raised valuations in order to skim graft.

By the late 19th century, however, there were a significant number of non-owning workers, especially in the industrial and financial centers of the north. Further, many of the richest capitalists in the country technically "owned" no capital. The practice was to create a trust that owned the assets, while the human being (the natural person) owned the trust that owned the capital. This was a way not only to create incredibly powerful monopolies, but also evade taxation. Not owning the property

• 1
• 2
• 3
• Next Page >>