In his opinion in the 1904 Supreme Court case, Compania de Tabacos v. Collector, Justice Oliver Wendell Holmes wrote that “Taxes are what we pay for civilized society.”
At the time, however, taxes constituted a small fraction of the U.S. economy and of each individual's household income. After the expiration of a special federal tax on chewing gum in 1902, according to the U.S. Department of the Treasury, "federal receipts fell from 1.7 percent of Gross Domestic Product to 1.3 percent."
The income tax was made constitutional by the 16th Amendment in 1913. The difference it made is described with surprising candor by the Treasury Department:
Prior to the enactment of the income tax, most citizens were able to pursue their private economic affairs without the direct knowledge of the government. Individuals earned their wages, businesses earned their profits, and wealth was accumulated and dispensed with little or no interaction with government entities. The income tax fundamentally changed this relationship, giving the government the right and the need to know about all manner of an individual or business' economic life. Congress recognized the inherent invasiveness of the income tax into the taxpayer's personal affairs and so in 1916 it provided citizens with some degree of protection by requiring that information from tax returns be kept confidential.Still, in those days, income taxes were a burden shouldered by few people. Less than 1 percent of Americans were required to pay taxes or file tax returns. (The now-ubiquitous Form 1040 was introduced in the 'teens.)
Even World War I, which raised taxes so substantially that the 1917 budget was "almost equal to the total budget for all the years between 1791 and 1916," brought the portion of GDP absorbed by the federal government only to 25 percent.
The First World War era seems blissfully tax-free in comparison to today. And I mean "today."
According to Americans for Tax Reform, July 11 is the day this year that the average American can begin keeping his earnings for himself and his family rather than turn it over to the government in the form of taxation or regulatory costs. This year, July 11 is Cost of Government Day.
As explained in a report compiled by ATR's Elizabeth Karasmeighan,
Cost of Government Day (COGD) is the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of spending and regulatory burdens imposed by government on the federal, state and local levels.July 11 is just an average, of course. Some states impose bigger tax burdens on their hard-working citizens than others do. As it happens, Virginia's Cost of Government Day is also today. But, as Doug Bandow notes in a column in The American Spectator:
Cost of Government Day for 2007 is July 11th. With July 11th as the COGD, working people must toil on average 192 days out of the year just to meet all the costs imposed by government. In other words, the cost of government consumes 52.6 percent of national income.
If there is any good news, it is that some states are better than others. In Alabama and Oklahoma taxpayers finished paying for government on June 22. Residents of Alaska and Mississippi quit paying on June 23. Seven more states finished in JuneAlthough Americans at the turn of the century did not enjoy all of the hallmarks of civilization that we do -- no "American Idol," no iPhones, no paparazzi pursuing Paris Hilton -- they could read recent novels by Mark Twain and Henry James, play ragtime on the parlor piano, see a vaudeville show, or enjoy a cold brew at a local pub.
Unfortunately, people in sixteen states, along with the District of Columbia, will continue paying for days, or weeks, later. Connecticut sets the record: August 2. New York trails at July 28. New Jersey follows on July 22. Of Connecticut, Karasmeighan explains, the burden "is so onerous both because it has very high relative incomes, getting a big hit from the federal income tax, and because it has high state and local taxes."
That's not a bad bit of "civilization" for less than 2 percent of national income.
At least we have the rest of the year -- what little is left of it -- to enjoy the fruits of our labor.