CHAPTER VIII How We Pay for Our Governments The fact that public money is spent for public services makes it clear that the cost should be distributed [divided] in some way so that each will pay his fair share." John A. Lapp. We are glad to pay for what we get. If we buy food. or if a doctor serves us, we expect to pay the bill. These are our private bills. But we also have public bills that must be paid. Our governments help us to live well. They make it possible for us to have better homes and schools. They often furnish services which we use without thinking how we got them. Yet these services cost money. Public bills must be paid. In general, we pay them through taxes. SUPPOSE THAT NO TAXES WERE PAID Suppose that the people in a city have stopped paying taxes. There is no water supply. The people are not. sure that the water is pure. The milk and foods have not been tested. The streets are not clean. There are no police to protect the people and their property. The prisons are open. The schools are closed. Many people are sick. Diseases are spreading. We would not want to live in such a city. We would not want our children to play there. We want pure water and food, clean streets, and good schools. We want officers to protect us from crime. We know that it is better to pay for what we need in order to live well. But the services of the Government cost money. The public bills get larger each year. We spend public money today for services that we did not have fifty years ago. For example, we now use public money to help prevent accidents in mines and factories and to help the farmers. WHERE THE PUBLIC MONEY GOES The chief duty of every government is to protect persons and property. Over three-fourths of the money spent by the Federal Government goes for this purpose. The next largest amount of public money is spent to teach and train our citizens. Our governments pay billions of dollars a year for schools and libraries. Public money is used to pay the teachers and the other public officers. A large amount of public money is spent on roads. If we live in a city, we demand that it supply us with many services. We want to enjoy our family and home. We want police, fire, and health officers to serve us. Of course, they must be paid for their work. Our State government gives us a few of the same kind of services that our city supplies. It gives money for the support of schools over the State. It may aid a university or college to which we can send our children at little cost. It spends money for roads, courts, and prisons. It helps to take care of persons who are poor or who have been hurt. It may care for those who are not able to work. The Federal Government serves more people than our State or city governments. It must keep up an Army, a Navy, and an Air Force. It must pay interest on borrowed money. It must meet the expenses of war. It costs more to build a big battleship than the total expenses for one year of a large city such as Buffalo or Minneapolis. WHERE DO THE GOVERNMENTS GET THE MONEY? The greatest part of the necessary money is raised by taxes. A tax is money that we must pay for the support of our Government. The law commands us to pay our taxes. We have no choice in the matter. Almost every person pays some tax in one form or another. In early years, our Government received money from the sale of public lands. But most of the best public lands have been sold. The money received was used to help pay the costs of government. We still have some public lands that contain oil, coal, gas, and other natural products. They could be sold. However, we want to save them for future years. TAXES ON INCOMES A large part of the public money of the Federal Government comes from taxes on incomes of persons and companies. The Federal Government receives about half of its tax money in this way. Some of the States also have income taxes. A few cities place a like tax on their citizens. A person's income is the money that comes to him from property, from labor, or from both. It may come as pay for work done, or as profits, interest, or rent from property that he owns. Living expenses make a difference in the amount of income tax we must pay. Two persons with equal incomes may not pay the same amount of taxes. One person may support a family. He may have to meet expenses that the other person does not have. A person who supports a family is allowed a larger amount of income on which no tax is collected. Persons with very small incomes do not have to pay any income tax. They pay other taxes but not always in a direct way. INHERITANCE TAXES The Federal Government and many of the States collect large amounts of money from inheritance taxes. An inheritance tax is a tax on property left to a person by someone who has died. We have no right, except as given by law, to give away our property at death. Nor do we have a right, except as given by law, to take property from others who may want to give it to us upon their death. In the early days, when a person died, his property went to the Government. The rights to give and to take property at death are given to us by law. The Government is free to list the conditions subject to which the rights may be enjoyed. If we want to use the rights, then we must meet the conditions laid down by law. We must pay the inheritance tax. A tax is usually placed on all large gifts of money or property that living people make to one another. This tax makes it impossible for people to give away such property while living and to thus escape the inheritance tax. Some of the States also have an inheritance tax. PROPERTY TAXES Our State and local governments get a large amount of their money from a general property tax. This is a direct tax on fixed property, such as lands and buildings. It is also placed on property that can be moved about, such as furniture, money, and stock. In some States the income tax has taken the place of the property tax. The Federal Government does not use the direct property tax. Each State can tax persons and property within its limits. But the authority to tax is not complete. For example, in some States the State constitution limits the amount of taxes that can be placed on property in any one year. Also, the States cannot tax the property of the |