Death and taxes

“Money is, with propriety, considered as the vital principle of the body politic; as that which sustains its life and motion, and enables it to perform its most essential functions.  A complete power, therefore, to procure a regular and adequate supply of it, as far as the resources of the community will permit, may be regarded as an indispensable ingredient in every constitution.  From a deficiency in this particular, one of two evils must ensue; either the people must be subjected to continual plunder, as a substitute for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in a short course of time, perish.”

~ Alexander Hamilton, Federalist No 30, “Concerning the General Power of Taxation”, Published 28 DEC 1787 in the New York Packet

Modern Translation:

‘Money is necessary for the government to perform its most basic functions.  It therefore needs to be able to get enough of it.  If it cannot, then either the people will be constantly overburdened to provide it or the government will fail.’

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It’s often said that death and taxes are the only certain things in life.  This is probably true, especially when you consider that government can in fact tax people to death (and in death).  However, America is still a far cry from some of the Old World’s fallen monarchies, which so over-taxed their people, they couldn’t make enough money to live.  And, jokes of estate taxation aside, there are few things more contentious today or in the Founders’ day than taxation.  Honestly, this is to be expected from a people who used a rallying cry of “taxation without representation” to fuel a war with their mother country.  Anyone who is entirely surprised that taxes continue to be a big deal has missed basic high school history, and failed to note the rising national debt.

But basically, Hamilton’s point is just as important today.  He is really asking everyone of his time a question we ought to be asking ourselves: do we really expect any government can function properly without the funds to maintain its current status and pay off debts?  With all the whining about taxes, it seems the American people want to have their cake and eat it too.  Everyone pays taxes.  You can’t buy food without paying taxes in nearly every state.  You can’t stay in your home in most states without paying taxes.  The real question isn’t who pays taxes, it is why is everyone paying taxes.  Why is taxation essential to good governance?  Hamilton gave us the answer (and he gave it a century or two ago).  Regular funding ensures the government doesn’t fail, nor does it beggar it’s own people.

Our problems now are the same as Hamilton’s were with the confederacy.  We aren’t pulling in enough funds to pay down our debt while still paying for day-to-day and future  government operations.  Once we understand the what and the why, we can think about the real answers to our problems.  It’s completely irrelevant how we got to this point, what matters is how we press forward.  Does it matter that we balance our budget? Obviously.  But budgeting is meaningless if there isn’t enough income.  At the end of the day, the government, like a household, needs enough income to keep the lights turned on and put food on the table.  If you can’t, you have to find a way to earn more money. Same thing for our government.  Tax reform, today, as in the founder’s day, needs to center on our government becoming sustainable.  That’s the only answer.

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