Remember that taxes pay for the benefits you get

One hundred years ago today, Delaware became the 36th state to ratify the 16th Amendment to the United States Constitution, and the federal income tax was made legal.

We all know people who would probably say that Feb. 3, 1913, was a dark day for America. In fact, there are some in Congress who have called for the repeal of the 16th Amendment. They do not like taxes of any kind, and the federal income tax least of all. Others do not go so far as to call for repeal, but the overwhelming majority of the Republican members of Congress have signed a pledge that they will not vote for a tax increase.

Fortunately for the country, Republicans and Democrats in Congress voted for tax increases as part of the “fiscal cliff” agreement. I believe that most of us realize, as Oliver Wendell Holmes said, that “taxes are the price we pay for civilization.”

Deciding what kind of civilization we want for ourselves and our children is ultimately what every debate about taxes and government spending is about. When we make decisions about tax revenues we need and how those revenues are spent, we are also making critical decisions that affect our long-term economic growth.

I want to focus in this column on what I believe is the single most important spending priority to ensure robust economic growth and an improved civilization: education.

No one I know questions the fact that we have a serious long-term deficit problem and that reducing expenditures must be part of the solution to the problem. But most economists agree that by far the most effective way to deal with the deficit is to increase the rate of growth in our economy.

Virtually all of them also agree that the key to long-term economic growth in a global economy is a competitive workforce. That means we must do whatever it takes to make sure our young people have the training and skills to attract and expand the industries of the 21st century.

If this is so, we seem to be cutting off our collective noses to spite our faces. One of the most destructive things we have done since the onset of the Great Recession has been to cut funding on education at all levels of government. This has forced local governments and school boards to fire tens of thousands of teachers and drastically slash school budgets.

Take a look at California if you want to see the long-term effects of refusing to adequately fund education. In the past 30 years, a series of referendum votes limited the ability of the state and its local governments to maintain what was once one of the best educational systems in the nation. Californians spent 5.6 percent of personal income on education in the 1960s; they now spend 3.6 percent. The state now ranks 47th on spending per pupil and 42nd in percentage of students who graduate from high school.

Faced with a $25 billion budget deficit when he took office two years ago, Gov. Jerry Brown, after successfully passing Proposition 30, which increases sales and income taxes, has made increased spending for K-12 education the top priority in his new balanced budget.

Californians are once again betting on education as the driver of long-term growth. Too many other states are not, and the country as a whole will suffer as a result.

Mindless cutting of funds in the name of deficit reduction is a sure way to ensure larger long-term deficits. When more Americans have the skills needed to succeed in our changing economy, the number of people paying taxes will increase. As the unemployment rate goes down and the economy grows, tax revenues increase and a balanced budget becomes feasible.

The combination of a planned and targeted “Pay-Go” spending discipline and the thoughtful increase in taxes under Presidents George H.W Bush and Bill Clinton led to large budget surpluses in the late 1990s. Federal revenue was almost 21 percent of GDP then; today it is less than 16 percent.

We had historic growth when paying much higher taxes then we pay now.

Our taxes pay for a lot of good things in addition to education, from our national defense to Medicare and Social Security. Keep them in mind when you hear the “no taxes for anything” arguments.

And maybe thank those Delawareans who had the foresight to welcome a federal income tax.

Originally published 2 February 2013 on