MARCH 7, 1996
Paul Solman explores the historical roots of both taxes and anti-tax sentiments.
PAUL SOLMAN: The Great Wall of China... Started about two thousand years ago, it was long enough, at its peak, to stretch from London to Chicago. The world's most massive public project, the Wall was built with the world's earliest form of taxes - human labor.
PAUL SOLMAN: This is a replica of the Great Wall, at Splendid China in Orlando, Florida, one of the innumerable theme parks that make Orlando a convenient spot for telling a a brief history of almost anything ... In this case a brief history of government and taxes. China seems a pretty good mirror of the ancient world in general - basically the powerful conquered and then taxed. One fifth of your crops was the normal take back then - that's a flat rate of around 20%... Or you paid your taxes in labor. In essense that's how the "have's" came to have, and the "have not's" to have not.
PAUL SOLMAN: The "have not's" were one too thrilled as a poem from the ancient Chou Dynasty suggests: Big Rat, Big Rat, do not gobble your millet. Three years we have slaved for you, yet you take no notice of us.
PAUL SOLMAN: In fairness, ancient government did benefit the weak, to some extent, the Great Wall, for instance, kept out foreign invaders quite successfully. But those in power mainly taxed to benefit themselves. Sorry to be abrupt, but we need to jump ahead... A millennium and a half and get to western civilization and so we move straight to a theme park known as "Medieval Times".
PAUL SOLMAN: It's also in Orlando, and you can come here to cheer on your favorite knight or see the kings and queens of yesteryear. In the Middle Ages, government usually meant feudal lordship, and in terms of taxes, the petty potentates grabbed from everyone they could... taxing everything from commercial activity to personal property. As a result popular legend made heroes out of tax resistors like the 13th century's William Tell, forced to shoot an apple off his son's head by angry government tax collectors in what's now called Austria. And made a heroine out of Lady Godiva...whose harangue to her husband to ease up on taxes prompted his dare - did she care enough to ride naked through town? But the taxing did continue, as European governments continued to grow in opulence and size. And that, brings us to the next back drop to Disney's Epcot World Showcase. By the 1600s, France, for example had grown so big and had so increased taxes to pay for its vast court and costly wars, that the king's financial advisor, a fellow named Colbert, was the power behind the throne. He likened taxpayers to Geese...
PAUL SOLMAN: The art of taxation, Colbert said, "consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."
Within a century, the people's hissing turned into a full fledged French revolution... And that brings us to the United States of America - the Magic Kingdom. This is Disney World's Liberty Square, our location for the fact that humanity's unhappy history of taxation without representation DID finally come to an end, at least in our part of the world. And the tax regime America ushered in has become the global norm - taxation with representation. But, says tax historian Elliott Brownlee, America's first leaders found that the people they represented reject direct taxation entirely.
ELLIOTT BROWLEE, Tax Historian: They found that what worked instead, were low tariffs, customs duties on a wide range of goods that produced revenue easily. These were consumption taxes, regressive consumption taxes, that took a larger percentage of the income of poorer people than it did wealthy people.
PAUL SOLMAN: As the "have nots" - or ordinary citizens - realized that these tariffs - that is , taxes on imported goods - were forcing them to pay higher prices, they pushed for a tax on the wealthy. An income tax - and they got one. To finance the Civil War, President Lincoln introduced the first U.S. income tax - which though temporary, fell on the well-heeled. But the pressure continued, to tax the income of the rich continued - to which the rich responded by labeling the income tax a communist plot against liberty, as depicted in this cartoon from the late 1800s. The populists, however, prevailed.
MR. BROWNLEE, Tax Historian: And that's exactly the kind of income tax system we got during World War I, it was a class tax, it was a soak the rich tax, it was a tax to get at the largest incomes and the largest corporations.
PAUL SOLMAN: It was after the First war and during the depression that a new deal began to emerge between FDR and the Democrats who expanded government and social programs for the "have not's," and the Republicans who broadened the tax base to pay for it all. It was during World War II, though, that the income tax, reached most Americans. Tax expert John Witte.
JOHN WITTE, Tax Historian: At the beginning of World War II, In 1939 about 15% of the people paid income tax. That's all, period. At the end of the war, we had 80% of our families paying income tax.
PAUL SOLMAN: Even Donald Duck was pressed into service urging average Americans to save, not spend, their money... For income tax payments that would support the war.
(Cartoon): You don't wanna forget our fighting men, do you laddy? Donald: "No, Sir!!!" Then you'll have to meet your tax payments...
PAUL SOLMAN: Though higher incomes were still taxed at a much higher rate, patriotism justified extending the income tax from the classes to the masses. During World War II, the government started withholding taxes from paychecks. In an increasingly middle-class America, the post war tax pact was becoming clear: most everyone pays, most everyone benefits. The pact was bipartisan. A Republican, President Dwight Eisenhower, extended the big government agenda, fighting the Cold War while building the Federal Highway system, among other projects. A Democrat, Lyndon Johnson, waged wars, against both the Viet Cong and poverty, redistributing tax revenues heavily and directly to America's "have not's". But in California in 1978, with American property stalled after decades of unprecedented middle class growth, the current middle income tax revolt began with an anti-property tax referendum known as Proposition 13.
HOWARD JARVIS: Tax, tax, tax, spend , spend, spend; Elect and elect and elect, is bankrupting we the American people and the time has come to stop it!
PAUL SOLMAN: Elliott Brownlee thinks this was a turning point.
MR. BROWNLEE, Tax Historian: Proposition 13 in California was an assault not simply on taxes, but on government as we know it. It was really the beginning of an anti-government crusade that has continued.
PAUL SOLMAN:The attack on government and taxes had continued for almost 20 years now. And despite the fact that, among advanced economies, the US along with Japan, the least taxed in the world, recent surveys show that taxes, and most specially property and income taxes, are more unpopular than ever. To which one obvious question is, why?