Not for Profit - Taxes

By Jason Fittler

This week I want to look at the history behind why we are taxed.

Being taxed can be traced back as far as the Egyptians, with Pharaohs taxing cooking oil, but the most common form of tax was to fund wars. This was started in the Greek and Roman times.

In times of war, the Athenians imposed a tax referred to as eisphora. No one was exempt from the tax, which was used to pay for special wartime expenditures. The Greeks are one of the few societies that were able to rescind the tax once the emergency was over. When additional resources were gained by the war effort, the resources were used to refund the tax.

It does however make a lot of sense. If a country is at war, then its citizens need to fight and fund the fighting. It is mutually beneficial for all.

The Roman Empire were one of the first to bring a more holistic view of tax, the inheritance tax. This is where inheritances were taxed at 5% to provide a retirement fund for the military.

The British invented a precursor to the modern income tax we know today in 1800 to finance their engagement in the war with Napoleon. The tax was repealed in 1816 and opponents of the tax, who thought it should only be used to finance wars, wanted all records of the tax destroyed along with its repeal.  The Chancellor of the Exchequer publicly burnt records but copies were retained in the basement of the tax court.

We can also note that there was countless upraising from citizen’s regards the payment of tax.

In 1794, US Settlers west of the Alleghenies, in opposition to Alexander Hamilton's excise tax of 1791, started what is now known as the "Whiskey Rebellion" The excise tax was considered discriminatory and the settlers rioted against the tax collectors. President Washington eventually sent troops to quell the riots. Although two settlers were eventually convicted of treason, the President granted each a pardon.

The Great Britain Smithfield riots in 1647 occurred because the new taxes lowered rural labourer’s ability to buy wheat to the point where a family of four would starve. In addition to the excise tax, the common lands used for hunting by the peasant class were enclosed and peasant hunting was banned.

Taxes make sense, they are a way that the government of the time can raise funds to provide the benefits for modern day living. The idea of taxing individuals based on their level of wealth has been around since the 14 century.

Again, it makes sense, as a flat level of tax will indeed disadvantage lower income levels.

So then, when did taxation make the change of funding necessities of the citizens of a country to a business? The base of tax collection has and should still be based around raising money to provide benefits for the citizens.

As such, it should be a zero sum gain, or a not for profit situation.

To break this down further. In good years there should be a surplus, this provides for lean years. In bad years, there should be a deficit as this allows government to spend money to create jobs and stave off poverty.

The government should never look to profit from raising taxes.

Surplus and deficit will be part of the normal cycle; you cannot estimate exactly how much it will cost to run the country year to year.  It is the economic cycle which will determine whether or not a government should be running is a deficit or surplus.

Right now, I would expect to see a deficit.

Question.

Why is the current government so determined to have the country in a surplus by 2013?