Ten Principles of Taxation

Did you know there are principles of good taxation?  Sounds like an oxymoron, doesn't it?  Did you ever wonder why our Founders made a big deal of property rights?  Was it to protect you from common thieves?  Or was it to protect you from a tyrannical government?

 Nationally known tax attorney and consultant, Daniel J. Pilla, has developed a list of Ten Principles that make for "sound constitutional and economic"  tax practices.*  His aim is at the Federal level, but these principles apply to taxation at any level.  Are they important?  You bet!  Just look at this:

"Of all the powers conferred upon government that of taxation is most liable to abuse.” 

 — Supreme Court of the United States 

Citizens’ Savings & Loan Ass’n v. City of Topeka.  87 U.S. 655 (1874) *

We will illustrate our commitment to the Bill of Rights for all Nebraskans regarding taxes over the next few weeks.  Each week we are introducing you to ordinary, tax paying Nebraskans who describe what our plan means to them.  In each interview these people have touched on basic rights to which we are pledged.  Each right illustrates one or more of the principles of good tax policy.  In our first two videos our interviewees have mentioned three rights, all of which recognize our Constitutional right to property:

1. Right # 3: No state income tax (1. Simplicity, 4. Stability, 5. Visibility, 8. Broad-based, 10. Constitutionality)
2. Right # 4: No property tax (1. Simplicity, 4. Stability, 5. Visibility, 8. Broad-based, 10. Constitutionality)
3. Right # 5: No Nebraska estate tax (1. Simplicity, 9. Equality, 10. Constitutionality)

  The numbered items following each right are the "Pilla principles" supported by that particular right.  Notice that all three rights have two Principles in common:

     1.     Simplicity

     10.  Constitutionality

Let's look closer at those two Principles:

1. Simplicity

"Citizens have a fundamental right to know what tax laws require, and compliance should be easy and inexpensive."*

What does this mean?  Let's let Mr. Pilla explain:

"The Supreme Court, in its 1926 decision Connally v. General Construction Co., recognized a fundamental right to know what legislation means, especially legislation that creates an affirmative duty to act. The majority wrote, '[A] statute which either forbids or requires the doing of an act in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application, violates the first essential of due process of law' (269 U.S. 385 (1926)).

"Lawmakers owe citizens and businesses a simple and understandable tax code.  More than any other area of law, tax law touches and affects Americans with a growing list of affirmative duties.  Given this, the constitutional guarantee of due process mandates a simple tax code that people can understand."*

10. Constitutionality

"Taxes must be imposed solely to fund clearly defined constitutional functions."

Pilla elaborates:

"Since the 1930s, Congress has used the federal tax laws for purposes other than raising revenue. Specifically, taxes are used to implement social programs and spending. One way this is done is through tax credits. 

"There is simply no legal or moral authority in a free society that justifies using the power of government to take from some what they have legally and peacefully acquired and give it to others who have not earned it."*

Since 1926 our tax codes have grown way out of proportion, both on the Federal level and on the state level, especially in Nebraska with its onerous property and state income taxes.  This writer has been trying to find out the size of  Nebraska's code, and legislative aides he has contacted have him doing a search of Nebraska laws to find out.  Still working on it!

* Quotes on this page are taken from the "Ten Principles of Federal Tax Policy", written by Daniel J. Pilla for The Heartland Institute, who holds the copyright.  We quote them as impartial observations on taxation.  The Heartland Institute takes no position for or against any particular tax plan.