Innovations in Tax Thinking: Applying History and Creativity to Kansas Tax Policy
Collins, Michael J
INNOVATIONS IN TAX THINKING:APPLYING HISTORY AND CREATIVITY TO KANSAS TAX POLICYRob Boyer, B.A.MALS Mentor: Michael J. Collins, Ph.D.ABSTRACTThroughout history there have been taxes. As Supreme Court Justice Oliver Wendell Holmes famously said in 1904, “Taxes are what we pay for civilized society.” From the recorded writings of the earliest civilizations to the front page of today’s newspapers, taxes have been core to human existence. Governments require revenue. In the earliest civilizations governments raised revenue to fight wars and defend their citizens. Taxes were used to build roads, ports, and fortresses. As the world economy expanded, taxes were used to promote economic development, build factories, and encourage commerce. As social needs evolved over the last two decades, taxes have been used to provide for the poor and the needy, for education, and to improve the quality of life for a nation’s citizenry.Regardless of the spending agenda, governments all need revenue. From the first civilizations to today’s modern government, the history of taxation has followed similar patterns and governments throughout history have faced similar challenges. What to tax? Should taxes be levied on property, income, or consumption? How to measure and determine the amount of tax to be paid? How to administer and collect tax? Should tax be direct to the citizen or indirect and collected at the source? How to find a balance in the fairness of tax? And how to deal with the inevitable strategies citizens develop to avoid tax? Should citizens self-report their tax liabilities with government systems to audit those reports? Or should government invest in the infrastructure required to collect taxes at the point of source?This thesis will explore taxes: the history, the newest ideas, the abuses, and the reasons why tax policy today has become so cumbersome and legalistic that it takes thousands of pages to explain all the complexities of our tax system. Changes to any area of our modern tax code have ripple effects that influence, benefit, or harm entire constituencies. Around the world, groups cry out for reform but are at a loss as to how to accomplish reform. Some call for higher taxes while others demand reprieve from what is already considered a repressive tax burden. There are taxes on property, sales, income, imports, exports and just about anything else governments can devise to tax. At the same time, government’s are issuing enormous tax breaks and exempting entire sectors of the world economy from tax liability. Meanwhile, we slog along without ever addressing the fundamentals of the system itself.Government tax policies are like an old car with a thousand joint owners. One part of the car can’t be remodeled without impacting the other parts of the car. A new transmission disrupts the carburetor or the fuel system or the spark plugs. In the meantime, governments borrow enormous sums of money to keep the old car running. Some of the owners pay more and more to help fund the car while others ride along and pay nothing. Eventually, the burden of maintaining this old car becomes enormous, debts exceed the value of the car, and owners, who can’t agree on what new car to purchase or what repairs to make, end up walking because the car won’t operate.Perhaps the global tax frustration was best summarized by Sydney Smith in 1820:We can inform Brother Jonathan what is the inevitable consequence of being too fond of glory. Taxes upon every article which enters the mouth or covers the back or is placed under the foot. Taxes upon everything which it is pleasant to see, hear, feel, smell or taste. Taxes upon warmth, light and locomotion. Taxes on everything on earth or under the earth, on everything that comes from abroad or is grown at home. Taxes on the raw material, taxes on every fresh value that is added to it by the industry of man. Taxes on the sauces which pamper man’s appetite and the drug which restores him to health; on the ermine which decorates the judge, and the rope which hangs the criminal; on the poor man’s salt and the rich man’s spice; on the brass nails of the coffin and the ribbons of the bride; at bed or board, couchant or levant, we must pay. The schoolboy whips his taxed top; the beardless youth manages his taxed horse with a taxed bridle, on a taxed road,and the dying Englishman, pouring his medicine, which has paidseven per cent, into a spoon which has paid fifteen per cent, flingshimself back upon a chintz bed, which has paid twenty-two per cent, and expires in the arms of an apothecary who has paid a license of one hundred pounds for the privilege of putting him to death. His whole property is then immediately taxed from two to ten per cent, besides the probate judge’s fees demanded for buying him in the chancel; his virtues are handed down to posterity on taxed marble, and he will then be gathered to his fathers to be taxed no more.This paper asks the very simple question “If we had to do it all over again, would we do it the same way?” It’s an important question because it impacts every person. This paper is not a commentary on government spending priorities. Each nation of the world makes that determination for itself. The reality, however, is that many governments, including our own, spend beyond what the tax system collects. The only outcome for that system is to raise taxes or continue borrowing to the point where supporting the debt becomes unsustainable. This issue of debt, in particular, has dire long term consequences. If for no other reason than the mounting global debt crisis, questions of taxes and tax policy must be explored.Is it possible to create a new tax methodology which meets the spending requirements of government without creating new debt or new tax burdens on the citizenry? Indeed, could debt be retired at the same time we reduce the burdens of taxation and increase spending on programs which governments require and citizens demand? Instead of constantly changing either the inputs (taxes) or the outputs (spending), what if the system itself could be reformed so that tax payers feel no additional burdens while beneficiaries receive no cuts? Do we dare to even imagine a system where balance and fairness are achieved for everyone?This concept will be explored using the State of Kansas as a platform for discussing innovations in methodology. Kansas serves as an excellent platform because it’s small enough in size and scale that changes to the tax code can be reasonably and easily measured. The United States federal system is too large in scope and complexity, but the Kansas landscape lends itself to cutting, pasting, and experimentation. Benjamin Franklin said that “nothing is certain except for death and taxes.” While there is little to be done about the former, perhaps it’s time for some fresh thinking on the subject of the latter. It’s also possible, that Kansas, as a smaller state where genuine reform is actually possible, could serve as a starting point for new thinking on taxation. That, of course, would require some courageous legislating by the elected officials of Kansas, but perhaps the time has come for just such courage.
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Marotta, John Peter, Jr (Georgetown University, 2012)At this time in our nation's history, which is characterized by an increasingly polarized and slow moving Congress, many American states have taken important policy steps to diversify their energy supply, encourage local ...