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Re: I.R.S. to Cut Tax Auditors

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  • Ram Lau
    And now take a look at what Teddy Roosevelt thought about taxing the wealthy exactly 100 years ago. His vision for America makes Bush look backwards and
    Message 1 of 2 , Jul 23, 2006
      And now take a look at what Teddy Roosevelt thought about taxing the
      wealthy exactly 100 years ago. His vision for America makes Bush look
      backwards and regressive.


      In his 1906 message to Congress, President Theodore Roosevelt asked
      lawmakers to enact a federal estate tax. He also endorsed an income
      tax but acknowledged the constitutional challenge posed by the Supreme
      Court's 1895 Pollock decision. As a Progressive, Roosevelt supported a
      more activist revenue policy than most of his colleagues in the
      Republican party. Congress chose to ignore his suggestions, leaving
      fiscal innovation for a later administration.

      The question of taxation is difficult in any country, but it is
      especially difficult in ours with its Federal system of government.
      Some taxes should on every ground be levied in a small district for
      use in that district. Thus the taxation of real estate is peculiarly
      one for the immediate locality in which the real estate is found.
      Again, there is no more legitimate tax for any State than a tax on the
      franchises conferred by that State upon street railroads and similar
      corporations which operate wholly within the State boundaries,
      sometimes in one and sometimes in several municipalities or other
      minor divisions of the State. But there are many kinds of taxes which
      can only be levied by the General Government so as to produce the best
      results, because, among other reasons, the attempt to impose them in
      one particular State too often results merely in driving the
      corporation or individual affected to some other locality or other
      State. The National Government has long derived its chief revenue from
      a tariff on imports and from an internal or excise tax. In addition to
      these there is every reason why, when next our system of taxation is
      revised, the National Government should impose a graduated inheritance
      tax, and, if possible, a graduated income tax. The man of great wealth
      owes a peculiar obligation to the State, because he derives special
      advantages from the mere existence of government. Not only should he
      recognize this obligation in the way he leads his daily life and in
      the way he earns and spends his money, but it should also be
      recognized by the way in which he pays for the protection the State
      gives him. On the one hand, it is desirable that he should assume his
      full and proper share of the burden of taxation; on the other hand, it
      is quite as necessary that in this kind of taxation, where the men who
      vote the tax pay but little of it, there should be clear recognition
      of the danger of inaugurating any such system save in a spirit of
      entire justice and moderation. Whenever we, as a people, undertake to
      remodel our taxation system along the lines suggested, we must make it
      clear beyond peradventure that our aim is to distribute the burden of
      supporting the Government more equitably than at present; that we
      intend to treat rich man and poor man on a basis of absolute equality,
      and that we regard it as equally fatal to true democracy to do or
      permit injustice to the one as to do or permit injustice to the other.

      I am well aware that such a subject as this needs long and careful
      study in order that the people may become familiar with what is
      proposed to be done, may clearly see the necessity of proceeding with
      wisdom and self-restraint, and may make up their minds just how far
      they are willing to go in the matter; while only trained legislators
      can work out the project in necessary detail. But I feel that in the
      near future our national legislators should enact a law providing for
      a graduated inheritance tax by which a steadily increasing rate of
      duty should be put upon all moneys or other valuables coming by gift,
      bequest, or devise to any individual or corporation. It may be well to
      make the tax heavy in proportion as the individual benefited is remote
      of kin. In any event, in my judgment the pro rata of the tax should
      increase very heavily with the increase of the amount left to any one
      individual after a certain point has been reached. It is most
      desirable to encourage thrift and ambition, and a potent source of
      thrift and ambition is the desire on the part of the breadwinner to
      leave his children well off. This object can be attained by making the
      tax very small on moderate amounts of property left; because the prime
      object should be to put a constantly increasing burden on the
      inheritance of those swollen fortunes which it is certainly of no
      benefit to this country to perpetuate.

      There can be no question of the ethical propriety of the Government
      thus determining the conditions upon which any gift or inheritance
      should be received. Exactly how far the inheritance tax would, as an
      incident, have the effect of limiting the transmission by devise or
      gift of the enormous fortunes in question it is not necessary at
      present to discuss. It is wise that progress in this direction should
      be gradual. At first a permanent national inheritance tax, while it
      might be more substantial than any such tax has hitherto been, need
      not approximate, either in amount or in the extent of the increase by
      graduation, to what such a tax should ultimately be.

      This species of tax has again and again been imposed, although only
      temporarily, by the National Government. It was first imposed by the
      act of July 6, 1797, when the makers of the Constitution were alive
      and at the head of affairs. It was a graduated tax; though small in
      amount, the rate was increased with the amount left to any individual,
      exceptions being made in the case of certain close kin. A similar tax
      was again imposed by the act of July 1, 1862; a minimum sum of one
      thousand dollars in personal property being excepted from taxation,
      the tax then becoming progressive according to the remoteness of kin.
      The war-revenue act of June 13, 1898, provided for an inheritance tax
      on any sum exceeding the value of ten thousand dollars, the rate of
      the tax increasing both in accordance with the amounts left and in
      accordance with the legatee's remoteness of kin. The Supreme Court has
      held that the succession tax imposed at the time of the Civil War was
      not a direct tax but an impost or excise which was both constitutional
      and valid. More recently the Court, in an opinion delivered by Mr.
      Justice White, which contained an exceedingly able and elaborate
      discussion of the powers of the Congress to impose death duties,
      sustained the constitutionality of the inheritance-tax feature of the
      war-revenue act of 1898.

      In its incidents, and apart from the main purpose of raising revenue,
      an income tax stands on an entirely different footing from an
      inheritance tax; because it involves no question of the perpetuation
      of fortunes swollen to an unhealthy size. The question is in its
      essence a question of the proper adjustment of burdens to benefits. As
      the law now stands it is undoubtedly difficult to devise a national
      income tax which shall be constitutional. But whether it is absolutely
      impossible is another question; and if possible it is most certainly
      desirable. The first purely income-tax law was passed by the Congress
      in 1861, but the most important law dealing with the subject was that
      of 1894. This the court held to be unconstitutional.

      The question is undoubtedly very intricate, delicate, and troublesome.
      The decision of the court was only reached by one majority. It is the
      law of the land, and of course is accepted as such and loyally obeyed
      by all good citizens. Nevertheless, the hesitation evidently felt by
      the court as a whole in coming to a conclusion, when considered
      together with the previous decisions on the subject, may perhaps
      indicate the possibility of devising a constitutional income-tax law
      which shall substantially accomplish the results aimed at. The
      difficulty of amending the Constitution is so great that only real
      necessity can justify a resort thereto. Every effort should be made in
      dealing with this subject, as with the subject of the proper control
      by the National Government over the use of corporate wealth in
      interstate business, to devise legislation which without such action
      shall attain the desired end; but if this fails, there will ultimately
      be no alternative to a constitutional amendment.
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