George Schmeling, age 12, of Esko, Minn., for his question:
WHEN DID WE START TO PAY TAXES?
Taxation is a system where people pay the expenses of carrying on the government. Payment of taxes is just as old as government itself.
In ancient days, simple societies paid taxes in goods rather than money.
Early societies found they needed some method of maintaining order and providing for justice, and those services could not be provided without costs. A system called "payment in kind" developed.
A tax can be either direct or indirect. A direct tax is one that the taxpayer pays directly to the government, such as the federal income tax. An indirect tax is one that is paid by a manufacturer or dealer, who then passes its cost on to the buyer of his product.
A tax is called progressive if the rate of the tax goes up as the sum to which it is applied increases. The federal income tax is the commonest progressive tax because its rates are higher for large incomes than for small ones.
If the rates of a tax are lower when applied to a large sum, the tax is called regressive.
In 1895, the Supreme Court of the United States ruled that an 1894 income tax law was unconstitutional because it was a direct tax not apportioned according to population. In 1913, however, the 16th amendment to the Constitution removed this restriction and the first modern federal income tax went into effect the same year.
Today the United States income tax provides most of the revenue used to run the federal government. Rates have varied, but they have always been progressive.
As demands for government services have increased through the years, the federal tax system has usually provided sufficient revenue to handle them. But state and local governments have had some trouble getting adequate revenue from their tax systems. Some have had to depend on the federal government to help.
One of the oldest taxes in the United States is the property tax. This tax has become the most important single source of revenue for state and local governments. The tax may be levied on such property as land, commercial buildings, homes and automobiles.
In Canada, the property tax is the chief source of revenue for municipal governments.
All economists agree that any tax system should be simple. Those who pay taxes and those who collect them should be able to understand and easily obey the tax laws.
Tax systems should also be stable. If the taxpayer knows in advance that he must pay the tax, he will be able to save money to pay the tax. If the system is unstable, the taxpayer cannot make plans.