In all the hype over Obamacare, the transportation bill in Virginia, and a slew of local laws – including renewed discussion of a meals tax in Fairfax County – Republicans are talking taxes all over the place. Yet most of the complaints about taxation miss the point. We can rant and rave that the rent is too damn high, or complain about the size of the tax changes the General Assembly just enacted, but that doesn’t address the real concern that Republicans should have about the tax code. It’s really not how high taxes are, or how fair they are. The real issue isn’t about what’s taxed or what the revenue spent on.
The real issue is why. Why are taxes being levied? What does the legislature hope to accomplish by enacting this tax? Is it to raise revenue? Or for some other purpose? The answer to this question is the key to determining whether a tax or a tax increase is appropriate. And far too many taxes today aren’t being enacted for legitimate reasons.
Obviously, taxation to pay for the costs of government – taxation designed solely to raise revenue – is legitimate. While we may not like paying taxes, most Americans understand that doing so is the price of living in a stable, safe community where rights are protected. And if government solely levied taxes to pay for services and benefits to the citizenry, we could focus our attention solely on the rates and how the revenue is spent. But not all taxes are solely designed to raise revenue. Too many taxes, from Obamacare to taxes on alcohol and tobacco, aren’t solely designed to raise revenue. They’re also designed to ban things, to curb behaviors some in society find distasteful, or – in the case of Obamacare – to compel behavior. Taxes on alcohol and tobacco are designed to make it too expensive to engage in those vices. Tax credits for renewable fuel vehicles are designed to encourage their use. Governments at every level, federal, state and local, all use taxes to influence behavior.
What’s worse – and this was highlighted by the Obamacare decision – the federal government has frequently used the tax power to circumvent the concept of limited government enshrined in our Constitution. In his column from June 14, George Will hits the nail on the head, pointing out a number of examples where the federal government intruded into areas of regulation that were previously reserved entirely to the states – things like social welfare legislation. The federal government used the tax power to enact national regulatory schemes for drugs, guns and the like that weren’t envisioned as federal spheres of authority when the Constitution was originally enacted. Where Congress doesn’t have an express or implied grant of authority to act under Article I Section 8, the taxation power has been used to compel or regulate behavior and circumvent the entire concept of enumerated powers.
Traditionally, the Commerce power and the expansive reading given it by the Roosevelt-era Supreme Court has been the basis for most of Congress’s excessive regulation. That expansion was slowed by both the Rehnquist and Roberts Courts, and for all its other defects, the Obamacare decision was essentially a nail in the coffin of the unrestricted commerce power. But in its place, Roberts reiterated a line of reasoning that has existed in Supreme Court jurisprudence since the Sonzinsky, Helvering and Steward Machine Company v. Davis cases in the 1930s, where any tax is deemed valid so long as it actually raises some revenue, even if the primary reason for enacting the tax wasn’t revenue but some other, collateral, purpose. It has been almost 80 years since the Supreme Court last struck down a tax as being outside Congress’s authority to enact, and that case was so egregious – Congress essentially developed a system of prices controls for agricultural products through a taxation and wealth redistribution scheme – that a similar contemporary program would be almost unthinkable today.
This is why it is so critical we ask “why,” not just “how much” and “who pays,” when it comes to taxes. On the federal level, the why is even more important, because all too often taxation is used as a means of avoiding the limitations on Congress the framers envisioned. And with the Obamacare decision, Congress has in its hands a blueprint to constitutionality that they can use to continue their expanding federal authority far beyond where it should be. On the state level, the concerns are less insidious, but they remain all the same. We, as a people, must be very careful when we adopt social legislation and especially when we do so through the taxing power. Short of prohibitions and criminalization, there is no more coercive form of government power than the power to tax at the state and local level. That’s one of the reasons why the General Assembly has rarely delegated their taxation power to localities.
This is why those concerned about Obamacare and the taxes it is levying, including the individual mandate, are spot on in their criticism. And it’s also why those who complain loud and long about the transportation bill (for the most part) are missing the point. When taxes are levied to raise revenue to fund critical needs like transportation, we should always pay attention but we shouldn’t start acting like we’re watching Armageddon unfold. But when we see Congress using the tax power to evade the limits the framers placed on the federal government, that’s when alarm bells should go off. I would love to start hearing Republicans of all flavors focusing less on the level of taxation or the way taxes are levied and start spending more time talking about the “why” behind every tax or tax increase that’s proposed. That’s where the real danger lies, and that’s where our attention should be focused.
