The Income Tax and Government Spending

Unleashed appetites can ruin a personal life. So also with government.

Why do we have an income tax?  The obvious answer would seem to be "for the government to get the funds it needs to run itself." But if that's true, then how does one explain this:

Summary of Receipts, Outlays, and Surpluses or Deficits
(in millions of dollars)

Year

Receipts

Outlays

Surplus/
(Deficit)

1907

666

572

87

1912

693

690

3

Source: The  Budget for Fiscal Year 2009, Historical Tables, p. 21


Note the fourth column, "Surplus/(Deficit)."  As can be seen, the numbers in 1907 and 1912 are positive, meaning that they represent federal budget surpluses.  But is there anything else notable about those particular years?

There is. 1907 is the year that President Theodore Roosevelt said this:
When our tax laws are revised, the question of an income tax and an inheritance tax should receive the careful attention of our legislators. In my judgment, both of these taxes should be part of our system of Federal taxation.
And 1912? That's the last year before 1913, the year in which the 16th Amendment established a nationwide income tax.

But in the previous year, 1912 -- and in 1907, when Theodore Roosevelt advocated an income tax -- the federal budget was in surplus. It didn't need the money.

So again: Why a new tax at a time when the federal government was running surpluses?  And why an income tax?

Brian Domitrovic, in his important new book Econoclasts, finds the answer in Theodore Roosevelt's famous "Man in the Arena" speech, delivered three years later at the Sorbonne in Paris. In it, as Domitrovic notes, "Roosevelt acknowledged that civilization generally benefited from its rich inhabitants," but that "there were also the idle, spendthrift, and avaricious rich":
But the man who, having far surpassed the limit of providing for [his], then piles up a great fortune, for the acquisition or retention of which he returns no corresponding benefit to the nation as a whole, should ... be made to feel ... unworthy ...
Here, Roosevelt anticipates the Keynesian fallacy that savers do not contribute "to the benefit of the nation as a whole," but what matters more, when considered in light of T.R.'s earlier advocacy of an income tax, is his apparent belief (inspired by guilt over having been born into wealth?) that the "wealthy" have no right to their wealth, that such wealth is "idle" and "wasted" when left in their hands, and that other people, through their government, have the right -- indeed, the duty -- to seize it for their own use.

The Bible, however, has something quite different to say on the subject:
And God spoke all these words: ... "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor."
To that list, I think we can safely add wealth. When God commanded us not to covet our neighbor's goods, he commanded us not to covet our neighbor's goods for a reason:  because it's wrong. And evil leads not to good, but only to more and greater evil. When it comes to taxes, and especially income taxes, Reagan described that evil clearly: "Government does not tax to get the money it needs; government always finds a need for the money it gets."

In 1913, We the People amended the Constitution to allow the federal government to punish "the rich" by seizing from them wealth the government did not need. The government, as Reagan said, quickly found a way to spend that wealth on its priorities, without the consent of those who actually created it. And so it has gone, from that day to this, with ever more spending, ever more taxing, and an ever-growing national debt.
Unleashed appetites can ruin a personal life. So also with government.

Why do we have an income tax?  The obvious answer would seem to be "for the government to get the funds it needs to run itself." But if that's true, then how does one explain this:

Summary of Receipts, Outlays, and Surpluses or Deficits
(in millions of dollars)

Year

Receipts

Outlays

Surplus/
(Deficit)

1907

666

572

87

1912

693

690

3

Source: The  Budget for Fiscal Year 2009, Historical Tables, p. 21


Note the fourth column, "Surplus/(Deficit)."  As can be seen, the numbers in 1907 and 1912 are positive, meaning that they represent federal budget surpluses.  But is there anything else notable about those particular years?

There is. 1907 is the year that President Theodore Roosevelt said this:
When our tax laws are revised, the question of an income tax and an inheritance tax should receive the careful attention of our legislators. In my judgment, both of these taxes should be part of our system of Federal taxation.
And 1912? That's the last year before 1913, the year in which the 16th Amendment established a nationwide income tax.

But in the previous year, 1912 -- and in 1907, when Theodore Roosevelt advocated an income tax -- the federal budget was in surplus. It didn't need the money.

So again: Why a new tax at a time when the federal government was running surpluses?  And why an income tax?

Brian Domitrovic, in his important new book Econoclasts, finds the answer in Theodore Roosevelt's famous "Man in the Arena" speech, delivered three years later at the Sorbonne in Paris. In it, as Domitrovic notes, "Roosevelt acknowledged that civilization generally benefited from its rich inhabitants," but that "there were also the idle, spendthrift, and avaricious rich":
But the man who, having far surpassed the limit of providing for [his], then piles up a great fortune, for the acquisition or retention of which he returns no corresponding benefit to the nation as a whole, should ... be made to feel ... unworthy ...
Here, Roosevelt anticipates the Keynesian fallacy that savers do not contribute "to the benefit of the nation as a whole," but what matters more, when considered in light of T.R.'s earlier advocacy of an income tax, is his apparent belief (inspired by guilt over having been born into wealth?) that the "wealthy" have no right to their wealth, that such wealth is "idle" and "wasted" when left in their hands, and that other people, through their government, have the right -- indeed, the duty -- to seize it for their own use.

The Bible, however, has something quite different to say on the subject:
And God spoke all these words: ... "You shall not covet your neighbor's house. You shall not covet your neighbor's wife, or his manservant or maidservant, his ox or donkey, or anything that belongs to your neighbor."
To that list, I think we can safely add wealth. When God commanded us not to covet our neighbor's goods, he commanded us not to covet our neighbor's goods for a reason:  because it's wrong. And evil leads not to good, but only to more and greater evil. When it comes to taxes, and especially income taxes, Reagan described that evil clearly: "Government does not tax to get the money it needs; government always finds a need for the money it gets."

In 1913, We the People amended the Constitution to allow the federal government to punish "the rich" by seizing from them wealth the government did not need. The government, as Reagan said, quickly found a way to spend that wealth on its priorities, without the consent of those who actually created it. And so it has gone, from that day to this, with ever more spending, ever more taxing, and an ever-growing national debt.