In this thread we explored alternatives to federal income taxes. I am interested in this topic because I firmly believe that, while the federal government must have adequate funding, it currently has too much and tries to do too much and is far too intrusive. The federal government has no business asking me how much money I made last year and I am uncomfortable with the degree of progressivity with almost 50% of wage earners contributing nothing to support our government while others must pay an unconscionable percentage.
Along this line I recently became aware of how the fed government was originally set up to be funded by the states instead of directly by the people. The concept is that each state sends in X% of all its collected taxes. This seems interesting to me for several reasons:
It limits the federal government to X% of total power in the nation.
It eliminates the need for an IRS.
It encourages competition among the states for lower taxation and efficient use of collected taxes.
Provides a proving ground for the 50 states to try different taxation schemes and through trial and error we can arrive at improved and more efficient means of funding government.
Each state could select any means it wishes to tax its populace and provides more choice for citizens. Don’t like the income tax? Move to a different state.
I know this concept is strongly federalist, but I don’t advocate repealing any civil rights or other laws that were originated because of perceived problems with federalism. I am concerned with the funding method only and wish to limit the debate to that specific area.
I assume you mean that “the concept is that each state sends in X% of all its collected taxes” for the purposes of this thread. The United States Constitution originally provided that the Federal power of taxation was limited to a straight per-capita tax: “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken” (art. I, sec. 9, cl. 4).
I’d love to get my 2 cents in, but I’m off to watch the Raiders beat Tampa. I’ll look forward to jumping back in here tomorrow.
One quick thought. I like your line of reasoning, but the sad truth is that most states have income taxes, and shifting the authority to the states probably wouldn’t change that.
I’ve always wanted to put a nice cap on the Fed budget, though
What you’re describing, flex, is the Articles of Confederation, under which the federal government had to rely on the states for contributions. It didn’t work very well. Under our current Constitution, the government always had the power to tax. Contra brianmelendez, only direct taxes had to be apportioned according to population. The federal government could, and did, collect “indirect taxes” such as excises and tariffs without the consent or intervention of the states from the very beginning. (For that matter, even “direct taxes” only had to be apportioned by population but didn’t require state intervention.)
I’m a libertarian conservative, but even I don’t want to go back to the Articles of Confederation. The federal government can’t defend the country without the power to tax.
I think the proposal wouldn’t stop the federal government from the power to collect taxes, rather it would change the mechanism by which these taxes are collected.
Indeed, the OP appears to envision a mandatory contribution scheme, although that forces the question of what sanctions would be used against states which failed to comply. But I’m not sure that wouldn’t be worse than what we have today. It would be like a giant unfunded mandate. If one group of politicians has the power to demand tribute, leaving it up to others to decide how it’s to be collected . . . I don’t know, it just doesn’t sound appealing.
The provision did not work in practise, because each state essentially decided for itself whether to collect the taxes and remit them to the Continental Congress, which was chronically short of money, even though the language of Article VIII was mandatory. The states that complied with the congressional requisitions found that they were shouldering a greater burden than the recalcitrant states.
The lack of a federal executive, capable of enforcing federal laws, was one of the major weaknesses of the Articles of Confederation, which helped lead to the Philadelphia Convention and ultimately the adoption of the Constitution. Stripping the federal government of that power would be a return to a system that didn’t work.
(erislover, the OP suggests that his proposal would abolish the IRS and keep the federal government from knowing how much money he makes, so I assumed he intends that tax collection should be entirely a state matter.)
jklann makes a good point here, which I was overlooking because of a semantic distinction. The 1787 Constitution treats excises and tariffs (duties) as different from, and subject to different rules than, “taxes”: “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States” (art. I, sec. 8). But any ordinary definition of “tax” ought to include excises and tariffs, which are certainly relevant to this thread to the extent that they were a principal source of Federal revenue before the personal income tax.
The Federalist Papers contain an extensive discussion about financing the Federal government under the proposed new Constitution, the proper scope of the Federal taxing power, and “direct” versus “indirect” taxation. The Tax History Project has collected the relevant papers online, with an introductory essay on “Taxing Federalism: The Power to Tax and the Federalist Papers,” at http://www.taxhistory.org/FederalistPapers/Default.htm. There is also a “Tax History Museum” that chronicles the history of, and debate over, the Federal taxing power at http://www.tax.org/Museum/default.htm.