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’Tis the Season of Taxes

Published: April 12, 2013
Section: Opinions


The beginning of the month of April marks many things. For some, it is the time to look for signs of the beckoning spring season, for others, it’s time to put that elaborate April Fool’s Day prank into action. Looming on the horizon, however, is an event that hardly anybody would be excited about—the Internal Revenue Service’s deadline for the filing of income tax returns on April 15 of every year.

With the exception of a few tax lawyers and accountants, having to stay inside and do taxes isn’t exactly everyone’s favorite activity in the midst of the beautiful spring weather. I think it’s safe to say that this holds true everywhere in the world. But taxes seem to be a particularly pejorative term here in America. I’m not surprised, as a combination of a very large adult population and a very complicated tax code makes the tax filing process one that is inevitably bureaucratic, cumbersome and full of irritating paperwork. Not only that, but states and towns impose state and local tax filing requirements that can only mean even more paperwork and more taxmen chipping away at one’s wallet. To top it off, the United States is one of the only countries in the world that requires all adult citizens to file annual tax returns based on income earned from all worldwide sources, even if one resides outside the United States and receives paychecks from a foreign company. If you turn out to be a citizen who lives and earns money abroad, your home state probably won’t let you off their own tax requirements easily either.
It is understandable then, why the IRS won’t be seeing the majority of tax returns filed three months in advance any time soon.

However, it would seem that the frustration goes beyond the complexities of filling out a few IRS forms—the use of taxation as part of wider economic philosophies has been an integral party of American political debate for centuries. Indeed, one could argue that resistance toward government taxation is almost an inherent part of American culture through the ages. In fact, the significant example of such resistance actually occurred before the founding of the American republic. The Boston Tea Party of 1773, in which a group called the “Sons of Liberty” protested against the tax policy of the British government by throwing taxed tea into the Boston Harbor instead of returning it to Britain, was one of several key events that led to the American Revolution. This in turn culminated in the Declaration of Independence—one of the nation’s most important founding documents.

Now flash forward to the year 2013, and the subject of taxation has become one of the most divisive issues in modern American politics. On one side of the spectrum, there are those who are against taxation or would rather lower tax rates. Anti-tax activists argue that in a capitalist system that needs a very high degree of market freedom, a tax regime that taxes the wealthy a lot is essentially punishing success, equivalent to stealing on the part of the government. On the other hand, progressives will argue that high tax rates that burden the rich more is not only necessary to fund government operations but also to maintain healthy economic equality—the rich should pay higher taxes in return for the role that society has played in their success (police, fire department services etc.). Ultimately, if the gap between rich and poor becomes too large, riots and protests can and will ensue (as the Occupy Wall Street protests have shown).
If one is a believer of Keynesian economic theory, as I am, then higher taxes and higher government spending makes much more economic sense. In times of slow economic growth such these, government spending is needed to stimulate the economy. If higher taxes need to be levied to pay for it, more should be taxed from the rich. It is this model that most closely corroborates with the data.

Modern conservatives today still perpetuate the ‘cut, cut, cut’ agenda of cutting government spending and taxes in order to ‘starve the beast of government.’ These policies can only damage the economy at a time when government investment is very much needed, and yet these proposals are part of the mainstream political discourse today and thanks to blatant political posturing, stand a real chance of being enacted. On some level, I understand how this economic philosophy might appeal to certain people. The argument that if one is in debt, one must spend less more easily appeals to one’s common sense and the concept is much easier to relate to.

However, this is based on a flawed assumption—the idea that the government behaves in the same way as any ordinary citizen, which is completely untrue. Individuals, unlike the government, do not have the power to tax others, and the government, unlike individuals, has the responsibility of providing goods such as police forces, the national defense mechanism etc. as well as the responsibility to support employment and consumption when the economy is weak. Complicating this is the fact that the government’s actions in recent decades have not exactly instilled confidence in taxpayers that their tax dollars are being well spent. There was the Iraq War, which was waged on false pretenses, and the Bush tax cuts that created a large hole in the government’s budget. Bush’s deregulation of the industry responsible for the 2008-09 financial crisis (the response to which required even more spending) didn’t exactly help either.

Despite this, however, it is time to rely on what history has shown us, now more than ever. In response to the Great Depression of the 1930s, Franklin Delano Roosevelt enacted the New Deal programs, which included, among other things, raising taxes. The result was an economy that recovered enough to fight a world war, and after the war, the economy generated a level of growth that made the United States the richest nation in the world. If one is looking for a modern example, look to Sweden, which has income tax rates as high as 56 percent, and yet Sweden recovered from the crisis much better than America. It is vitally important, now more than ever, for the government to use its coffers to stimulate demand, and raise taxes on the wealthy to pay for it, because the rich can not only easily afford to pay for it (especially after the incredibly generous tax cuts enacted in the past 50 years), data shows that countries with better income equality have shown more robust economic growth.