Friday, December 26, 2014

The Question of Taxes: Grover Norquist and the Campaign to Keep Taxes Low

By Matthew Dunn

            If there ever was someone who qualifies as a power broker it would be Grover Norquist.  Norquist is the founder and President of the Americans for Tax Reform advocacy group.  This group advocates for public officials to sign the Taxpayer Protection Pledge, in which elected public officials put in writing that they will never raise taxes.[1]  If public officials ever rescind this pledge, then the Americans for Tax Reform, will aggressively campaign against them.  Norquist and his group have become immensely powerful, as almost all members of the Republican Party have signed his pledge.
            Norquist would like to be able to shrink the federal government to where it could fit in a bathtub.  He believes that the federal government today, abuses its power and uses tax money to do fund its efforts.  Norquist believes that the United States government functioned very well when its spending and taxation levels were around 8% of GDP which was last achieved around the turn of the 20th century.  Without federal income tax, the government could not operate such programs as social security and medicare.  However, Norquist believes that individual initiative would better serve the problems that these programs were intended to help.[2]
Indeed Norquist’s historical information is very correct.  The government had much less ability to tax up until 1913.  In 1913, the 16th Amendment to the Constitution was passed, which allowed Congress to directly tax the income of citizens.   Over the course of the rest of the 20th century and beyond, the Federal Government would take much more of a role in governing the nation.  So as Norquist believes that we would be better served by the taxation levels of the United States before the passage of the 16th Amendment, I thought it would be interesting to examine some current issues, and see if the nation was better served during this time period as well as examining taxation issues before and around the 16th Amendment. 
Tariffs, Labor, and Finance
            As the United States always needed some kind of funding for its government, before a national income tax was created, the main system of funding relied on tariffs.  Tariffs are taxes on imported goods.  Until the time period after World War II, the United States had very high tariff rates, as a way of funding the national government.  In addition to this, tariffs were used to prevent foreign competition, as imported goods would be made more expensive by U.S. tariffs, therefore giving people an incentive to buy domestically made U.S. products.  Tariff rates on foreign goods were roughly 57% in 1897, making it one of the highest rates in the world.[3] High tariffs were one of the ways that the United States began to become one of the largest industrial centers of the world. 
            However, being a domestic industrial power had some negative consequences for the owners of large industry.  One of the major ones was the aggressiveness of labor.  In the years around the turn of the century, labor unions became large and organized a great deal of strikes.  When times got tough for corporations, they usually cut wages and employees and this would usually lead to labor related violence.  Massive strikes, rarely seen today, were common during this period.  The railroad and steel industries were particularly prone to strikes, and strikes would often lead to huge shutdowns and interruptions in production.  Although, many of the strikes were put down, labor’s power began to grow, and one could say that around the turn of the century, labor unions became a force in national politics. 
            In today’s world, labor unions are on the decline.  One of the major reasons is that corporations and other large companies have the ability to export their labor to countries that offer lower cost labor.  Today’s world is generally governed by low or non-existent tariffs, which allow them to continue to sell cheap consumer goods, even if they are manufactured elsewhere. 
            This brings a predicament when it comes to views like those of Grover Norquist.  As his group would love to have a government which did not have the power to tax, where would even the 8% of GDP for government spending come from.  One can’t imagine that Norquist supports a return to protectionist tariffs, because free trade has been supported and championed by Republicans for several decades. 
            What Norquist doesn’t have is a sense of history.  Perhaps this is because essentially his pledge against taxes is a marketing strategy.  In fact if he studied history, he would find that much of the roots of what he rails against as big government, was connected to the early history of the Republican Party.  Lincoln was responsible for passing large tariff increases, and actually instituted the first income tax levy as a way to pay for the Civil War.  In fact Republicans have always been thought of as the party of business, and there was a time in our history, when tariffs made sense for business as a way of reducing their competition from foreign competitors. 
            Norquist is a symptom of what is wrong with Congress at this time.  His conservative advocacy group is one of the reasons why Congress always seems to be so deadlocked.  If Congress ever decides that they want to get something done, they need to ignore the rhetoric and marketing of people like Grover Norquist, and start reading their history books. 



[1] Americans for Tax Reform “About the Taxpayer Protection Pledge.” ATR.ORG. http://www.atr.org/about-the-pledge (accessed December 24, 2014).
[2] 60 Minutes “Grover Norquist’s Hold on the GOP.” CBSNEWS.COM. http://www.cbsnews.com/news/the-pledge-grover-norquists-hold-on-the-gop-29-11-2011/2/ (accessed December 24, 2014).
[3] Hobsbawm, Eric. The Age of Empire: 1875-1914.  New York: Pantheon Books.  1987. Pg 39.  

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