A Brief Timeline of Taxation of the United States, Chapter 3
So the question remains, what happened with the tax system in the United States?
US tax makers have been collecting what they have been sowing for a long time. The honor system has been trumped by a monster in which every tax payer is under surveillance due to the heavy inclination of evasion. In other words, compulsion has replaced consent. Honor has been replaced with spying on citizens.
In the mid-20th century, there was not a bank in the US that told the IRS about customer affairs, interest was not reported, withdrawals of cash were not reported, and not a thing that went through accounts were photographed. Also, real estate transactions were not reported, stock transactions weren’t reported, dividends weren’t reported, income from other sources (Form 1099) wasn’t reported, and US Customs didn’t require a declaration of cash carried.
Before it was espionage, it was an honor system, and it functioned quite well. The deterioration that happened over the previous fifty years to the present is that anything of any fiscal significance is now reported.
Adam Smith stated that people will evade taxes and tax laws shown no respect when there is a general suspicion of a lot of meaningless expense and a lot of misapplication of the public revenue. For example, $500 toliet seats, high-dollar grants to study the sex lives of ants, etc.
For the sake of catching a handful of tax resisters and evaders in the 1950s Congress spawned a tax monster of the US tax system that more and more taxpayers attempt to evade. As a general rule, widespread tax evasion is a clear signal that a government’s tax system is bad. Citizens will pay taxes, even income taxes, if the rates are acceptable.
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