Possibly the greatest responsibility Congress possesses is their constitutional right to levy and collect taxes from the American population. However, great debate has ensued to determine what should be taxed, who should be taxed, and the level of tax to be applied to each of these. This debate has had a pervasive effect on every policy and program affecting the lives of Americans and has been a driving factor of doctrine in every presidential administration. The application of various political models can be used when assessing America’s tax system but two, in particular, the Incremental and Elite Theory offer significant insights into the development of the current tax system.
In a letter penned to George Washington by Thomas Jefferson discussing whether Congress had the constitutional right to establish a national bank as a matter of the “General Welfare” clause in the Constitution, Jefferson wrote, “To consider [general welfare]…as giving a distinct and independent power to do any act they please, which might be for the good of the Union, would render all preceding and subsequent enumerations of power completely useless. It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please (Heffner, R., 2009).”
Clearly strong language, but Jefferson understood the dangers of incremental shifts of power from the states to the federal government, closing this argument with his fears of elitism as a result of unfettered legislation based on the proposed benevolence of legislation or policy for the people. Unfortunately, Jefferson’s prophetic predictions have become part of the fabric of the bureaucracy that is the American political system today. The rejection of our system is so poignant and the disgust so great, the electorate elevated a man to the nation's highest office who has never held political office or has military experience in the hopes of altering the status quo and returning the wealth and strength of America to her people.
Incremental Theory is an excellent political model to describe how far the US has progressed from those early Jeffersonian days. Legislatures have long known that sweeping and drastic changes are generally rejected and ineffective if rolled out too quickly. Instead, making small, seemingly insignificant, changes are recognized as much more palatable and stand the greatest chances of approval. This approach to legislative “improvement” has not, however, stopped lawmakers from attempting big changes, and by 1913, The United States Congress adopted the sixteenth amendment to the Constitution that allowed the federal government to collect taxes on individual incomes, adding to the state tax burden already imposed on American citizens.
Assuming the need for additional revenues were necessary and justified does not legitimize Congress to use those taxes for anything they please. Article 12 of the Federalist Papers that debates the appropriate vehicles by which Congress can and should levy taxes on the American People may have been somewhat shortsighted considering the magnitude of the world wars that have heretofore been fought, the increase in population, the demand for more social welfare, and the massive expansion of the federal government beyond the original scope of the constitution. The Article's author, Alexander Hamilton did not believe direct taxation of the American people by the federal government was an option. The country was in desperate need of funding and had been unsuccessful collecting enough revenues to fund the functions of government. Initial propositions of a consumption tax and commerce tax have transformed into a tax system goliath where a single dollar earned can be taxed as much as 40% and more depending on an individual’s income and the state in which they live. The amount Americans pay in taxes today is the result of incremental policies and the revenues the government takes in today, although the most ever, still come well short of the amount it spends. It borrows to meet its spending habit as opposed to reducing its spending to match its revenues.
Sometime later, discussions ensued regarding the most appropriate means to disburse the tax burden among the citizens of the 13 colonies. In article 54, direct taxation based on the size of the state, today, represents an archaic and disproportionately unfair vehicle in which to collect taxes from the people. Taxing in this manner actually emboldens the application of the Elite theory since it guarantees more influence based on wealth. Today’s progressive tax system represents an equally unfair means of taxation because it redistributes tax revenues from tax providers to tax consumers in massive quantities. The quest continues to determine the most effective tax vehicle that brings in the revenue the government requires and is also applied uniformly and fairly.
Arthur Laffer did an excellent job of describing the balance between revenues and taxation through the presentation of what has become known as the Laffer Curve. The curve represents the changing proportionality of tax rates to tax revenues. Zero taxation yields zero revenues. As taxes are increased, revenues will increase to a certain point (the crest of the bell) until the amount of revenues decrease as a result of punishing taxation (www.laffercenter.com). Recent Keynesian economic policies under the Obama administration have ballooned government spending that have resulted in huge deficits and pushed corporate tax rates to the highest in the world among the 34 nations belonging to the Organization for Economic Co-operation and Development (OECD). The unfortunate result of the deficits and taxation has been massive borrowing and an increase in the number of corporations moving jobs overseas where labor and tax rates are less.
The Election of Donald Trump to the presidency began a fundamental shift in the country's microeconomic policy and its macroeconomic approach to what Thomas Friedman calls a Flat World. America's shift in its trade agreements, corporate tax structures, and individual tax levels, although still progressive in nature, was responsible for the repatriation of trillions of dollars of corporate wealth, the lowest unemployment in more than 40 years, the lowest number of food stamp recipients, immediate increases to personal wages and a massive boom to the stock market indexes. The initial cost of these tax breaks is around one trillion dollars over 10 years but conservative economic theory has shown time and time again, that lower taxes garner increased government revenues. When the people have increased opportunity to determine how they expend they money, as opposed to government's punishing tax structures, government and the people both win.
As the wars in Iraq and Afghanistan have drawn to a close, the question now is what is driving the annual deficit spending. Madison seems to be quite clear that the sole reason for borrowing money from foreign countries is to maintain the national defense. Article 41 covers several topics but ultimately declares the issue of borrowing money in order to maintain a militia and for the national defense to be essentially “well established and universally agreed upon.” However, there does not seem to be any mention of borrowing money from foreign countries in order to fund the myriad of social welfare, and infrastructure policies in the country. This, apparently, was not a subject people in that day considered part of the normal sphere of government’s purpose and its intended involvement in the lives of the average citizen. Rugged individualism was very much a part of the fabric that was America as was the pursuit of individual happiness and the opportunity to stake a claim in the rock of prosperity. There were no provisions in the federal government to provide all of life's necessities and it was generally considered among Americans too dishonorable to rely on others to provide for your needs. Fortunately, as our sensibilities toward slavery, equality, and government's role have matured, so too has our ability and desire to care for the nation's downtrodden. I digress.
Shouldn’t it be the responsibility of Congress to limit its expenditures to its total current revenues as opposed to increasing taxes to meet their expenditures? Surely, the need for increased revenues must be met during extraordinary times in order to meet the demands of the nation’s protection as expressed by Madison, as well as its commerce, and other responsibilities expressly delineated in the Constitution, but it is no secret that the normative and historical realities of politicians involve, with few exceptions, men and women of mostly great prosperity, power, and prestige – a point Thomas Jefferson was keenly apprehensive of and a condition that has unfortunately brought dishonor and shame to the political community. Yet, the power of the purse, in all its applications to fund numerous policies, agencies, and other measures, is rarely used to rally against the cause of spending. Article 58 relates this power as a necessary weapon that can be wielded as a means to redress the government for grievances and in today’s economic environment of sequestration, continuing resolutions, massive deficit spending, and growing national debt, the call for spending restraint has been as loud as in any time in our history. In recent elections, the massive surge of Tea Party officials elected to office demonstrates the call to action against continued, irresponsible spending.
Polished, wealthy politicians aren’t always necessarily a bad thing for national progression and its betterment. Article 36 of the Federalist Papers expresses this point clearly. Although specifically referencing taxes to be applied within a state, I believe the following statement could also be applied equally to other aspects of governance. Section five of Article 36 states “Inquisitive, enlightened statesmen are believed, everywhere, best qualified to make a judicious selection of the proper objects of taxation.” I believe the application of Elite theory is essential to ensuring the continued protection of America’s interests both domestically and abroad, primarily because of the general lack of understanding much of the American population possesses with respect to geopolitical strategies and socioeconomics.
Insofar as the Elite Theory pursues these ambitions, it is a vital bridge between the externalities acting upon the United States and the ignorance of America’s citizens in the largely esoteric fields involving socioeconomic, geopolitical strategies, and domestic and international relations. In this sense, I depart from the writing of Dye in his text Understanding Public Policy where he states “elites actually shape mass opinion on policy questions (Dye, T., 2013)” and suggest my own, more accurate statement that “elites protect policy development from mass opinions that are based on emotional sentiment as opposed to rational thought ensconced in reality.“
