Taxes and Society
We have compiled the list of
questions below based on inquiries that we
receive. This information is generic in
nature regarding tax policy questions and is
intended
to serve as tax advice. We also cannot
provide up-to-date information on any
Administration or Congressional proposals
that may affect the information shown herein.
Any questions regarding specific tax
situations or for help in filling out your
tax return should be directed to your
attorney, accountant or other tax
professional, or to the Internal
Revenue Service. The IRS will not
comment, though, on the legislative merits of
current tax law, or on pending Congressional
action that may change the tax code. Finally,
we make every effort to make certain that the
information contained here is accurate, but
due to the fluid nature of the legislative
process, changes in tax laws may occur that
are not reflected here at the time of
publication. To the best of our knowledge,
this information is accurate.
Why do I have to pay
taxes?
 Oliver Wendell Holmes, former
Justice of the United States Supreme Court,
said, "Taxes are what we pay for a civilized
society." In some respects, a "civilized
society" is the rationale for government in
the first place. The signers of the
Declaration of Independence set out to
establish a new form of government for the
"protection of life, liberty, and the pursuit
of happiness". To this end, the framers of
our constitution enumerated the proper fiscal
functions of government as "to pay the Debts
and provide for the common Defense and
general Welfare of the United States". Taxes
are simply the preferred method for paying
for these governmental functions, the other
methods being the issuance of public debt and
the issuance of money.
Justice Holmes' famous quote establishes
the propriety of taxation, but it tells us
nothing about the form or levels of taxation,
and, indeed, matters have changed
significantly in both regards over the years
since his pronouncement. For example, in 1902
the Federal tax burden stood at 1.3 percent
of Gross Domestic Product (GDP). A century
later, the federal tax burden had risen
nearly 20 fold, to 20.8 in the year 2000.
Taxes perform another important role
besides funding government activities. Taxes
also provide citizens with basic information
regarding the total price for those
activities. Government has become a dominant
factor in our economy, absorbing significant
resources for its purposes and redirecting
many more resources through its regulatory
policies and through a mixture of taxation
and spending programs that remove resources
from some areas to transfer those resources
to other areas. It is critical, therefore,
that citizens have as much information as
possible regarding these diverse programs and
regarding their aggregate totals so they may
decide for themselves whether the
government's activities are appropriate.
Taxes, and especially the paying of taxes,
yield citizens a personal sense of the total
price of those activities.
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Why do
I have to pay taxes?