No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken. —U.S. Constitution, Article 1, Section 9
The Founding Fathers had it right. They knew that direct taxes on citizens would allow politicians and lobbyists to pick and choose among citizens: who to tax harder, who to tax lighter. They knew that direct taxes might hit some states harder than others. Most importantly, they knew that the role of the Federal Government was Defense of the people, and that each person, rich or poor had a life that was equally worth defending. Therefore, the states were to pay apportioned taxes to the Federal Government to do this job.
But then tribalism and racism that the Civil War had been fought to end began anew.
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. Passed by Congress July 2, 1909. Ratified February 3, 1913.
After the sixteenth amendment was passed, money began to flow to the Federal coffers. The government was awash with money compared to before. It had enough funds to bail out the bankers who had loaned money to European nations at war, if necessary. And in 1916 we went to war at the urging of J.P. Morgan and others under the threat that our economy would be devastated (sound like TARP?). In 1917 we were at war, but then the bankers ended up getting loan guarantees from the U.S. government in the event Europe couldn’t repay them.
In 1917, the federal budget was equal to the entire federal budget of the previous 125 years (and this includes the cost of the Civil War!). This is what income tax allowed.
After the war the money kept rolling in. And guess what, the income tax rates kept increasing. And people from all segments of society began to ask the federal government for a portion of this windfall. For the first time, the federal government began to distribute money to the states.
This pool of federal money became a new source of power over the states. Money was loaned to states for building roads and social welfare.
This pool of federal money became a new source of corporate welfare for large U.S. corporations, and Calvin Coolidge became known for the (unconstitutional) statement “The business of government is business.”
Lobbyists for every special interest you can imagine flocked to Washington to get a portion of the pie. But these portions were not apportioned.
Just as our Founders knew that collecting apportioned taxes from the states would be a fair and equitable burden on all citizens, the apportioned distribution from the federal government to the states is the only fair and equitable method for the federal government to distribute funds. However, in a republican form of democracy, where society is built from the bottom-up, rather than the top down, such distributions should be unnecessary, if not morally wrong. Rather, excess funds should be returned to the states on an apportioned basis.
The new U.S. tribalism
Well, the folly has returned to visit the U.S. in the form of a new tribalism, with little distinction in principle between the power battles for federal money in the U.S., and the battles over control of national power by tribes and ethnic groups in the third world, e.g., the Hutus and Tutsis in Rwanda.
Here is a recent analysis of stimulus reimbursement:
SIGNIFICANT RACIAL DISPARITIES IN DISBURSEMENT OF STIMULUS FUNDING
Today marks one year since the American Recovery and Reinvestment Act (ARRA) was signed into law. An analysis by Advancement Project, a national civil rights organization, of state ARRA fund allocations in 2009 and their diversity levels reveals states with greater racial and ethnic diversity received less funds in 2009. The range for ARRA spending per state resident starts at a low of $491 in Florida and goes to a high of $2289 in Alaska.
Advancement Project also examined the relationship between state unemployment rates and ARRA spending which shows a significant disparity between unemployment rates and per capita ARRA funds received. For example, for every one percent increase in the unemployment rate, there is a decrease in ARRA funds of $28.48 per state resident.
Newly-released federal data published on www.recovery.gov indicate state ARRA funds allocations in 2009. A new feature of the website, the “diversity index,” shows the racial and ethnic diversity of each state. States are ranked from 0 to 100 – a rank of 100 means that if two random people were picked in a state, there would be a 100 percent chance that they would be of different races or ethnicities. According to this index, California has the greatest diversity with a score of 83, and Vermont has the lowest diversity with a score of eight.
While the organization that produced this data, wants to lobby for further redistribution to specific groups they feel were left out–perpetuating the underlying problem. It would have been much more fair to redistribute American Recovery Act Funds to the individual states on an apportioned basis, and let the states compete with their use. While this would foist the problem of tribalism onto the individual states, it is much more easily managed there. And it would insure that the federal government potentially gave the same amount of funding for each person in the U.S.
The principle of subsidiarity that I promote in Life, Liberty, and the Pursuit of Happiness, Version 4.0, would push that stimulus distribution down even further, arguing that the state should redistribute any such stimulus funds on an apportioned basis back to counties, towns or its citizens.
Ending the New Tribalism
The Civil War was fought to end the inequality of racism, however, it led to increased federal power that eventually stimulated a new tribalism based on political contest over federal funds. The two parties, rather than representing different political philosophies degenerated into economic competition on behalf of the largest contributors to the party–a corrupt kickback system.
Ending this new tribalism will only stop when both the methods of federal taxation and distribution which created it are brought to an end. Short of repealing the 16th amendment, this would mean a gradual implementation of the principle of apportioned taxation. And it would mean laws that only distribute federal funds on an apportioned basis, unless they are used for the specifically mandated purposes of the federal government: defense and interstate commerce.