Federal tax returns are due next week, once again leaving productive citizens pining for the days before Wilson-Gorman.¹ Last year, federal tax revenue plunged 34 percent to $138 billion.² With fewer people working and uncertainty surrounding the uptake of deductions, the IRS does not know what to expect this year. (But the agency did promise to improve its toll-free telephone taxpayer support service.)

Perhaps Adam Smith could have helped, if anyone studied his writings anymore. In Chapter II of Book V, Smith proposed four principles of proper taxation. The section is titled, "Of the Sources of the General or Public Revenue of the Society." They are not flawless, but there is a lot to agree with. Here are Smith's rules:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible ... in proportion to the revenue which they respectively enjoy under the protection of the state.
2. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself.
3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.
4. Every tax ought to be so contrived as both to take out and keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state.

Though interesting, they are still merely thoughts on tax determination and collection. It is government spending that is in greatest need of reform today. Without a reduction in spending, the publicly-held portion of the national debt will double over the next 10 years. That is, if we're lucky and everything else goes according to the government's central plan.

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¹ The Wilson-Gorman tariff of 1894 was the first modern-day income tax in the United States. The income tax was later set in stone by the Sixteenth Amendment in 1913.

² Lynch, K. "Tax Revenue Plummets" American Institute for Economics Research, May 20, 2009

³ Adam Smith, The Wealth of Nations, Book V, Chapter II, published 1776

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