Jean-Baptise Colbert, French King Louis XIV's Minister of Finance, once quipped, "The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing." For much of the past century, Congressional leaders have demonstrated their commitment to Colbert's maxim by taxing us in successively more opaque ways.
The first wave followed World War II, when the federal government adopted the payroll tax. After the 16th Amendment was ratified in 1913, allowing for a national income tax, Americans who paid income taxes filed a 1040 and wrote a check at tax time. Keenly aware of their tax burden, voters kept income tax rates low. But during World War II, the federal government revived an idea first experimented with during the Civil War: income tax withholding.
For Congressional spendthrifts, the payroll tax was a gold mine: People less aware of taxation are less likely to object to tax increases or to penalize politicians who raise taxes. As the U.S. Treasury notes, "(withholding) greatly eased the collection of the tax for both the taxpayer and the Bureau of Internal Revenue. However, it also greatly reduced the taxpayer's awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future."
War also led to another form of hidden taxation, the corporate tax. The first corporate taxes appeared in 1909, at just 1 percent of profits. By 1918 - the last year of World War I - they had jumped to 12 percent. World War II took them to 40 percent, which is about where they have remained since. Yet, as economist Walter Williams notes, corporations are "merely tax collectors" who shift taxes to consumers in the form of higher prices.
Politicians since have excelled at the art of taxing you without your knowing it. The Alternative Minimum Tax, yearly extending to lower tax brackets, is one form. So are sales taxes - again, collected by retailers rather than paid directly by consumers. So too are taxes on gasoline, cigarettes, your utility bills, your insurance premiums, special travel taxes and more. Why do politicians add taxes to your cable bill? Because it is another way of taxing you without your knowing it.
By far, the most innovative and cowardly forms of hidden taxation are found in deficit spending, which was used to great effect by the previous administration and is being perfected by the current. The nonprofit Peter G. Petersen Foundation pegs the value of the "real national debt" at $56.4 trillion – that's $184,000 in future taxes for each and every American.
Today congressional leaders face a new dilemma: They are running out places to find money. Foreign governments are growing increasingly skittish about lending us money, which will soon drive interest rates higher. Under the House health care proposal promoted by President Barack Obama, top income tax rates in some states could top 57 percent.
Looking for ways to make up the difference, the federal government has already begun shifting costs to the states. Democratic and Republican governors balked at the House health bill, arguing that plan saddles them with costly new Medicaid obligations without the funds to pay for them. Republicans relied on similar unfunded mandates under President Bush: REAL ID, for example, cost the states $14 billion while allocating just $40 million to pay for the program.
Medicare has perfected the art of indirect taxation, or cost-shifting. A recent study in New Hampshire estimated that Medicare underpayments to hospitals and doctors result in a 17-percent increase in the cost of commercial health insurance rates. In other words, rather than raise taxes to pay for Medicare obligations, Congress simply underpays providers and makes the rest of us pick up the difference through our health insurance premiums. The House health bill, which does the same thing, raises even more from you indirectly by penalizing all but the smallest businesses up to 8 percent for not offering health benefits.
States have responded by issuing mandates of their own on local governments and private industry. In recent years, several states have cut state education spending on treatment for autistic spectrum disorders, shifting costs to private insurance policyholders by mandating that insurance companies pay for treatment. Similar mandates have been issued for hearing implants and other treatments.
Recent calls on state and federal levels to tax energy company "excess" profits are another form of indirect taxation. Wisconsin's plan to tax 2.5 percent on the price of gasoline - despite Gov. Jim Doyle's claims that companies will be prohibited from passing along the cost to consumers - is one such example of indirect taxation. So too is Wisconsin's 800-percent increase in car rental fees.
Colbert's truism about politicians has held up over the centuries. But at some point - and the United States is nearing that point - they run out of easy places to borrow or raise money. In the months to come, expect the federal government to push more mandates on the states and for states, in turn, to push them downhill to local governments and businesses.
But don't forget, some 220 years ago after the fact: The state Jean-Baptiste Colbert helped build - the home of Versailles and the "Sun King," which helped finance America's own anti-tax revolution - ultimately ended in a revolution over taxes.
Jim Burkee is an associate professor of history at Concordia University Wisconsin.



