Taxes built this country - Ahwatukee Foothills News: Opinion

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Taxes built this country

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Posted: Wednesday, April 27, 2011 4:00 pm

Taxes un-American? Only if you have never studied or thought about the history of the United States, the world and tax laws.

Back before the Civil War, taxes were levied on imports/exports (which hurt trade) and on items deemed sinful. Tax products in this manner and fewer people will buy those products. This economic tool worked so well, we still use it. In fact, the increase in cigarette tax is credited with the decrease of cigarette smokers. Therefore, when I hear Republicans and other conservative parties who claim not to be Republican declare that a consumption tax would fix America, I am quite perplexed.

How exactly does that work? If taxes on products have proven to decrease consumption for 100-plus years in the capitalist USA, then wouldn't higher taxes on goods lead to a significant drop in demand? Of course it would.

For example, Costa Rica has employed this principle for decades, which makes their sales tax pretty steep at a whopping 15 percent. I lived in Costa Rica for two months and brought more money than people make there in six months. Products were incredibly cheap and for the first few weeks, I didn't mind the 15 percent tax. But, by week four, I quit buying products. I brought $4,000 to spend and came home with $2,800.

Missing out on all those purchases has surely cost this third world democratic country with one of the highest literacy rates in the world (a country this educated with income tax is normally a first world country) a lot, including decent roads and better wages. If the consumer has to pay the government a higher percentage of the total price, the seller sells less, makes less and decreases the wages paid to his/her employees.

Jon Beydler ("Income taxes are downright un-American," by AFN, April 13) mentioned that he has always worked for himself and hasn't always liked paying income taxes. Well, I wonder if Beydler would be upset if his customers were asked to pay $15 for every $100 they spent at his store? After all, what comes first; a bought product or paid income tax?

Beydler then tries to convey that eliminating income tax in favor of a consumption tax would actually reduce the tax burden of the poor. Really? Again, this is only true if you ignore spending and saving habits of those living in the U.S. and other countries.

No matter in what country you reside, the poor are poor because they don't have a lot of money. Many would say the poor do not even have enough money for the things they need. This means that every penny a poor person earns goes toward consumption. Therefore, a poor person with a take-home income of $20,000 spends every last dime. If we lived in Costa Rica, that person would spend $3,000 in taxes, or 15 percent of their income.

On the other hand, rich people who make more money than necessary to spend on basic food, clothes, etc., tend to save a high percentage of their income through 401Ks, Roth IRAs, etc. A rich person making $300,000 may choose to save one-third of their money (a relatively small number for this income bracket), spending $200,000 and $30,000 on sales tax.

Sure, the affluent family pays 10 times the poor person, but as a percentage of income, the poor person is asked to bear a significantly greater burden. With this consumption tax, the poor contribute 15 percent of their salary to their country while the rich put forth a measly 10 percent.

Americans tried this upside-down, backwards equation for our first 100 years. It didn't work; many historians will tell you this is why the south lost the Civil War. The Northern Republicans, realizing that they couldn't pay for a war or trade route repairs with a consumption tax, began income tax as we know it, sliding scale and all. The South couldn't pass that law and ran out of money as southerners were not making and buying dresses in the midst of battle.

When times are bad with this tax system, they are really, really bad with no hope of improvement. And the North won (fortunately).

And, taxing income has worked. The U.S. saw its greatest strides since income taxes began. With income taxes, we could afford one of the best infrastructures in the world.

President Lincoln, the father of income taxes, also understood that if more Americans had the opportunity to go to college, then more Americans could create wealth. And he was right. The history of the U.S. is littered with inventors and engineers educated at our top universities thanks to taxes paid by the rich.

The "Greatest Generation" is a wonderful testament to our American income tax laws. Because income taxes were much higher while they were young, our country could afford to give them small class sizes. They had wonderful after-school programs to keep them out of trouble. They had art, music and physical education one to five times every week. They did not volunteer for World War II, yet they were given a big thank you in the form of a free college degree. In other words, the good ol' days were good because we paid taxes.

So when you hear that taxes are un-American, remind the speakers that taxes built this country. Remind them that the "Greatest Generation and baby boomers benefitted greatly from taxes paid by those with more and it's selfish of those two generations not to do the same for their children and grandchildren.

• Shauna Johnson lives and works in Ahwatukee Foothills.

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