In Defense of the Income Tax

by Scott Mooneyham, The Insider, September 9, 2013.

If you read much about the history of taxation in the United States, you begin to realize that a driving force behind tax policy has been the idea of creating fairness between different classes of taxpayers.

Americans have never liked taxes, but they have always been with us.

While the history of federal taxation grabs most of the attention in the popular press, colonial and state taxation has a much longer and varied history.

From some of the earliest days of the Virginia colony, colonists paid a poll tax.

Today, people remember poll taxes as a means to prevent black voters in the South from casting ballots. But they began as a simple flat tax levied on every free man to pay for colonial administrations.

The tax gradually became less popular (until resurrected for the aforementioned voter suppression purposes) because people recognized that it wasn't fair.

The wealthy could easily come up with a shilling to pay the tax; for a laborer, it might represent several days work.

Assessments on property gradually became the dominant form of taxation in the colonies, but from their beginning questions of fairness led to change.

The Massachusetts Bay Colony in 1643 imposed something called a "faculty tax" on the earnings of some professions. This predecessor of the income tax came in response to complaints by some colonists that the exclusive use of a property tax to raise revenue was unfair to farmers and merchants, as some professions largely escaped taxation because they owned little property.

Property taxes, in various forms, remained a staple of colonial and then state government revenue streams into the 20th century. By the turn of that century, states began leaving property taxes as the purview of local governments in favor of the income tax.

North Carolina adopted its modern income tax in 1919, though various business taxes had existed for decades.

During the Great Depression, property taxes and income taxes took huge hits. In response, this state and others adopted sales taxes to keep schools open and government operating.

Since then, some combination of income and sales taxes have made up the bulk of the state's revenue stream.

Lately, state lawmakers have been pushing to change the balance.

Legislators approved an overhaul of the state's tax structure this year that cuts the corporate and personal income taxes, and eliminates a tiered system in which higher earners paid higher rates.

Sen. Bob Rucho, a Charlotte Republican, continues to talk about completely eliminating income taxes while broadening the sales tax to cover services.

Rucho and some of his colleagues argue that eliminating the income tax will make North Carolina more competitive when it comes to industrial recruitment.

But the income tax, applied properly, remains a fairer tax. It recognizes that those who have benefited the most from an economic system supported by the structures of government should pay more to support those structures.

Not so long ago, a lot of political leaders -- Democrat and Republican -- embraced that concept.