Business Columns & Blogs

Before we say so long to 2013, let’s raise a glass to 100 years of taxation

Happy birthday! No, that’s not quite the mood we want to strike.

Many happy returns? Nope, bad play on words given the subject matter.

You don’t look a day over 100? You’re not getting older, you’re getting better? Happy birthday, and many more? No, wrong, definitely not.

All right, then, what is the appropriate message to commemorate the 100th anniversary of the constitutional amendment authorizing a federal income tax? What do you say to someone who has everything — or at times seems to want everything of yours?

What, had it slipped your mind?

We’re betting that April 15 didn’t slip your mind. That’s a date now so ingrained in the American conscience that its mere mention requires no elaboration, rather like Dec. 25 or July 4.

But indeed this is the centennial of the federal income tax. Since we in the media love anniversary stories, if not the actual event, we thought we ought to get some thoughts in before it’s no longer 2013.

The modern American income tax is the result of the 16th amendment, ratified in (you guessed it if you’ve done the math) 1913. It wasn’t this country’s first go-round with a federal income tax. Congress approved income taxes to finance the Union’s cause in the Civil War.

Otherwise, the government largely financed its operations through tariffs on imported goods, which is why generations of students of American history have had to wade through long accountings of debates over tariff policy that were hugely controversial and bitter in their day but seem arcane today. (Not that tariff wars can’t occasionally flare up in contemporary times, although they tend to have more to do with specific product categories and industries, such as softwood lumber, or as the result of some trade-policy fight, such as over commercial airplanes.)

The income tax has hardly been controversy-free either. That’s partly from the natural aversion to taxes of any kind, and from the amounts imposed and how the government has spent it.

But the income tax was only partly about raising revenue for the government, and that’s been a source of trouble unto this day. It was also seen by some advocates as a way to punish the rich (marginal rates on top earners at various times have reached as high as 94 percent during World War II and at 70 percent through the 1970s) and redistribute wealth.

The income tax, it was supposed, was a “fairer” method of taxation than import duties (which everyone pays indirectly) or other taxing systems.

That’s a debate that has stayed with us through the last 100 years. Fairness is always in the eye of the beholder, or more properly the wallet-holder, so it’s impossible to attain consensus on what a fair tax system would be. The result is 50 state tax systems, no two of which looking exactly alike, reflecting various philosophies about how to balance the burden of taxes.

Some states approach the question by trying a little of everything (or a lot; if you’re ever prone to complain about tax burdens here, talk to a tax refugee from states such as New Jersey). Washington, being one of seven states with no income tax (two others tax only dividend and interest income), has decided to try a lot of a few things such as sales, property and business gross-revenue taxes, the lottery and some hoped-for growth categories such as marijuana.

Washingtonians have repeatedly rejected the notion of a state income tax; the 65.6 percent vote against in 2010 was the seventh time they’ve said no. That can be credited to or blamed on tradition, or the not unjustified suspicions that a state income tax won’t in the long run mean a reduction in the overall tax burden or that a state tax will eventually mean a local income tax as well.

You can pin some of it as well on revulsion to the system’s complexity. Tax information service CCH says its Standard Federal Tax Reporter has grown from 400 pages in 1913 to 73,954 pages in 2013. The tax code has grown because the tax system is not just a method of revenue generation but a tool of social engineering and economic development. No one can hope to even know what’s in it, much less understand it all; that’s by design.

Thus efforts at “reform” rarely get very far. Those that built the tax code subsection by break are not in the mode to hand back their goodies (and that includes us as consumers). The American taxpaying public, meanwhile, harbors suspicions that “reform” is just a code phrase either for “more” or someone trying to engineer some additional “fairness” for their own interest.

So you may be excused from thinking that the 100th anniversary of the income tax is cause for celebration, or even a polite note of recognition. That’s all right. Those responsible for the system won’t mind. But don’t skip paying your respects on April 15. That they do tend to notice.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at