Taxation Theory; W.M. Curtiss

Should taxes be for revenue only, or as a means of social con trol, or both? Should taxes be levied on cit izens equally, or should "ability to pay" be a major consideration? Where practicable, should the "benefit principle" be followed? That is, if government performs a service for specific individuals and not for all, should those who directly benefit be charged for the service? For example, should high way users be required to pay for them through specific taxes on motor fuels and motor vehicles and direct tolls? And, if such taxes are intended for highway use, are safeguards against diver sion desirable? Dr. Curtiss is Executive Secretary of the Foundation for Economic Education. 674 How pay for government schools at all levels? Studies show the tremendous economic advantages of high school and college educa tion. Most parents urgently want education for their children. Should the cost of government schooling be charged on a "bene fit" basis, either to the parents, or against the enhanced future earnings of the students?

Changed Circumstances In the early days of our coun try, tariffs were an important source of revenue for the Federal government. And there was much debate among tax theorists as to the revenue-raising versus the pro tectionist and discriminatory as pects of tariffs. But "tariffs for revenue only" becomes an aca demic issue when the national government requires one quarter or more of people's earnings. Seeking the ideal taxation form1967 TAXATION THEORY 675 ula is of course praiseworthy, but cenditions of the search have changed! The taxation experts of 100 years ago were talking about nine cents out of each personal income dollar. Today, nearly 40 cents of every dollar of personal income goes to support national, state, and local units of govern ment. This calls forth new the ories of taxation. Collecting the billions of dollars now spent by various units of government is no longer a question of "soaking the rich" but of how to extract 40 cents of each personal income dollar without stirring up a tax payer revolt.

Taxation has become a tool of monetary and fiscal management. The experts speak of "fine-tuning" the economy so that employment will be high and productivity will expand. There doubtless are those who look upon taxation as a means of redistributing wealth, in the be lief that some have too much in come and some too little. The pro gressi ve income tax is an expres sion of this belief, as are current discussions of a guaranteed an nual income for all. So, in view of the growing tax burden and the increasing use of taxes as a tool for social and fiscal control, let us further review the new theories and modern prob lems of taxation. Hidden Taxes The tendency of taxpayers to revolt against high taxes causes tax collectors to try to hide the tax burden so that the taxpayer will hardly be aware of what is happening to him. If this process takes place at a time of rapid growth in the economy, levels of living may rise at the same time that taxes are increasing. With out an understanding of what might have been, people can truth fully proclaim: "We never had it so good!"