TAX: The Federal Income Tax Post 1

So in keeping with my earlier desire to keep my blogging relevant to my classes, I am now enrolled in my first tax class, and my first management class.  Honestly, I don't have high expectations about the management class, I'm enjoying it so far, but that's not the same as finding it useful or learning something from it.

I'm only two classes into Tax yet, and I only received my book yesterday, so I'm not too far in yet.  Already I find it very interesting.  I think most people, myself included, get turned off from tax because of the excessive number of rules and the oppressive nature of being taxed.  Just the title of the class hits the snooze button for most people.  And yet...

Some history of the Federal Income Tax.  The first tax was established in 1861.  It was established during the Civil War, and raised some 376 million, which, in todays dollars is 9.4 billion.  It was repealed immediately following the war.  The next attempt was in 1894.  This bill was opposed by the Supreme Court in Pollock v. Farmers Loan & Trust Co. on the basis that the tax was not, as demanded by the constitution apportioned properly, and thus unconstitutional.  Than in 1909, the first Corporate Income Tax was successfuly installed, and by 1913, the 16th Amendment was ratified and made the Pollock case irrelevant.  "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

A couple of other interesting things:  Adam Smith came up with what we call the four canons of taxation, which are still used as general rules today.  They are
1) Equality-fair and equitable
2) Convenience-administrative simplicity
3) Certainty-easy to predict
4) Economy-nominal collection costs and minimal compliance costs

For those who prefer the flat tax, and say progressive taxation isn't fair and equitable, a very interesting argument is made in two parts.  First, the poor spend a greater percentage of their income.  Myself, as a member of the middle class spend roughly 80% of my income every year.  And that figure doesn't even include rent, which means that in many months, I actually overspend my income.  Taking 10% away from me, is much more detrimental than taking 10% from the upper class, and downright crushing from the working class. 

Second, the justification for taking a higher percentage from the middle class and the rich, is rooted in the concept, that the higher your wealth, the more you are actually able to partake in society, and so a higher percentage of tax is justifiable.  This is very much the case.  Think about it:  If I were to get an IRS field audit, I would have to hire a tax attorney to represent me.  Though there are places like legal-aid for the poor, it is undeniable that those with money, get better justice.  It is undeniable that those who can afford personal finance, brokers, and other representative expertise glean more from society than the poor and disenfranchised--And these rewards are in many cases intangible, and without apparent monetary value.  I should note that the last 100 words are so my own.

Another thing our professor noted about the flat tax is that even if a legislator were to somehow squeeze it through, private interests would then begin carving out their own exemptions anyway and we'd just be back where we were before.