In February of 1913, the 16th Amendment to the US Constitution was passed, giving Congress the power to levy an income tax. Since then, Americans have been paying money, taken from their hard earned income, to the IRS to fund government functions. Is it a good thing, though? Should the income tax exist? I intend to present the case that the income tax is unnecessary, economically detrimental, and morally wrong.
To start with, there is no need to have an income tax in order for the government to perform its necessary functions. Prior to 1913, the government managed its affairs without it, mostly thanks to the few amount of responsibilities the federal government had at the time. During this time, the government was financed with small tariffs on imports. President Andrew Jackson in 1928 was able to use this revenue alone to pay off all the country’s debts. The markets in the United States were free and flourishing, with no government interventions, and none of the tariffs were high enough to have negative effects on the economy.
When the income tax was introduced, it was done so with the promise to shift the massive amounts of wealth from the upper classes to the lower classes. As with everything the government promotes, it was for a good and righteous cause. Not everyone saw it that way, though. Samuel McCall, a Representative from Massachusetts, said, “The character of the argument which had been made leads me to believe that the chief purpose of the tax is not financial, but social. It is not primarily to raise money for the state, but to regulate the citizen and to regenerate the moral nature of man. The individual citizen will be called on to lay bare the inner-most recesses of his soul in affidavits, and with the aid of the Federal inspector, who will supervise his books and papers and business secrets, he may be made to be good, according the notions of virtue at the moment prevailing in Washington.” Essentially, the goal of the income tax was to give the government a way to control the economy. Contending that it was necessary for the funding of government when it was passed would be false; the government could and did function without it long before it was enacted.
Taxing the income of Americans, including any income level, is detrimental to the economy. This is so in different ways, depending on the individual’s class. The upside to the income tax is that it raises a lot of money for the government, and it is effective at doing so. However, it also affects GDP, private business stocks, and the average number of hours worked.
The Tax Foundation shows that lowering the bottom income tax bracket of 10% to 0% would raise GDP 0.27%, stocks 0.49%, and hours 0.21%. On the other hand, raising the top tax bracket of 39.6% to 44.6% would lower GDP 0.48%, stocks 1.1%, and hours 0.26%. Raising it to 59.6%, which is similar to some European countries, would lower GDP by 2.01% and hours by 1.07%.
Individuals have an incentive to work hard and make more money. Lower classes have this incentive in order to have more disposable income for recreation and fun, and upper classes have this incentive in order to invest more in things that will stimulate the economy and brings them more money. Both of these add more money into the economy to flow around.
The more money is taken from an individual’s check, whether rich or poor, the less they will work and spend because there is less return on their investments. When working 1 extra hour puts someone in a higher tax bracket, they may end up losing more money than they make.
Finally, income tax is morally wrong. It is, essentially, theft of Americans’ hard earned money. A worker is paid a certain amount by his or her employer, and a significant percentage of that money is withheld from the worker’s paycheck. As a result, the worker is no longer receiving the money his labor is worth. The government has come in and taken the worker’s money without his or her consent, by pain of fines and/or jail time. This is the definition of theft; income tax is not only a poor system economically, it is morally wrong.
Eliminating the income tax outright without making other changes would be foolish, however. A small percentage increase in the economy is negligible compared to losing out on hundreds of billions of Dollars in tax revenue without also curbing spending. Government spending must be lowered accordingly in order to keep the strength of the economy up.
Cederwall, Erik. “Effects of Changes in the Income Tax Rate.” Tax Foundation. Tax Foundation, 22 June 2015. Web. 6 June 2017.
Eddlem, Thomas R. “Before the Income Tax.” The New American. The New American, 18 Jan. 2013. Web. 15 June 2017.
“How Do Taxes Affect the Economy in the Long Run?” Tax Policy Center. Tax Policy Center, n.d. Web. 15 June 2017.