Forwarded from Anthony (reply to query on taxes)
lnp3 at panix.com
Tue Nov 18 07:25:02 MST 2003
In answer to Jurrian’s question,
“.... Is it the case that the working class just provides the state with
a guaranteed income, and that the US Government can just spend the money
as it sees fit, or is there a clear relationship between tax collection
and expenditure of tax revenue, in the way described above, so that no
tax money can be spent other than for the purpose for which it was paid
No, the governments -federal, state, and local - do have restrictions on
how they spend particular tax revenues.
No, there is no clear relationship between tax collection and expenditure.
Yes, they can - through various subterfuges - spend tax money for
purposes other than those it is earmarked for.
However, the most important tax revenue in the United States comes from
the Federal income tax - and it goes into the general fund, and is
spent according to the annual budget passed by the Congress of the USA.
Historically tax revenues in the United States were mostly in the hands
of state and local governments until the passage of the 16th Amendment
to the Constitution in 1913 established Federal Income Tax. The Federal
budget was limited mostly to income from customs and fees before that
Property taxes and sales taxes were always, and have been until the
present, in the hands of state, county and city governments.
Restrictions on the uses of these taxes are mostly determined by the
respective level of government (state, county, municipal) - so there are
all kinds of different restrictions in different localities. In
California for example, local sales taxes are earmarked for certain
projects - like subsidizing public transportation in the case of a small
portion of the sales tax in the San Francisco Bay Area.
Property taxes have been traditionally set aside for public schools and
public universities, this tradition goes back to the massive occupation
of public lands by squatters, and near squatters from the 1600’s until
the end of the 19th century. Its roots are in the Northwest Ordinance
(1787 or thereabouts), and the Land Grant Act (1862). However, this
tradition has long been breached by many exceptions. Property taxes are
the most important revenue for most state governments and are spent on
just about anything and everything from education, social welfare, to
the police and prison construction (a big budget item in the last decade.)
Social Security taxes are complicated by a mixture of state and federal
taxes and benefits. But in the USA, the social security system
established during the 1930’s is a pension system, with taxes levied on
employers and employees,and deposited into an independent agency, the
Social Security Administration.
This regime lasted until the ended of the 1960’s. It began to unravel
with the ‘tax payers’ revolt’ in California, and the now famous
‘Proposition 13’ - a referendum which put a cap on property taxes. The
victory of Proposition 13, and the associated victory of Ronald Reagan
in the Gubernatorial race there, marked the beginning of a three decade
rollback of historic gains in public education, social welfare, social
security, unions, science, etc.
How that rollback has played out is very complex - because it has never
been completely successful in any of its aims. Now earmarked tax
revenues are often ‘lent’ to finance other programs. This is especially
the case with social security funds.
In general, taxes in the US are usually not earmarked for particular
expenditures, and when they are, ways are found to spend them elsewhere.
All the best, Anthony
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