The capitalist's case for the income tax: The widely despised and thoroughly misunderstood levy helped the United States move toward a more open economy.
One hundred years ago today, Secretary of State Philander Knox certified
to Congress that the Sixteenth Amendment had been ratified by Delaware
and Wyoming, clinching the required 36 states. Congress was free, once
again -- this time without the threat of obstruction from the Supreme
Court -- to do something that has changed the scope of government for the
next century. Washington could tax incomes. ...
Many political observers rue this day in history. To them, the income
tax embodies all that is wrong with the modern federal government. By
encouraging some economic activity more than others, they say that the
income tax, like much federal regulation, dampens economic growth and
stifles entrepreneurial creativity.
Far worse, in their eyes, is that the income tax makes the federal
government possible. It funds bloated services and enables all sorts of
social and economic meddling in the sacred workings of the free market.
But what would the past 100 years have looked like without the Sixteenth
Amendment? Certainly not much like a free market--unless something else
had come along to get rid of tariffs and tariff politics, which had
been restraining the economy. ...
[T]he Sixteenth Amendment created a new political and economic
environment. It freed us from the shackles of tariff politics, lowered
living costs for many Americans, allowed the federal government to raise
enough money to build roads, mount the world's greatest army, provide
income security to the poor, and transform ourselves into the dominant
country in the 20th century. In other words, the income tax not only
enabled the modern federal government. It enabled the modern US economy.