83

p Expansion of the economic functions of the state has been followed, as shown in the preceding chapters, by a swift increase in federal government spending. Taxation is inevitably the main source of financing governmental spending. It, as it were, embodies the economically expressed existence of the state. “Taxes,” according to Karl Marx, “are the source of life for the bureaucracy, the army ... for the whole apparatus of the executive power."  [83•1 

p Throughout the 20th century the financial operations of the state and, consequently, also the scale of taxation have been growing much faster than the indices characterising the general economic process (the GNP, national income, and so on). In view of this an increasing share of the GNP has been drawn into redistribution along the channels of the government’s financial system. Some indicators illustrating the development of this process are given in Table III-l.

p In examining data on the increase in the federal budgetary tax revenue we at once notice the following point. The tax burden has been increasing steadily, but very unevenly. The curve characterising this process resembles a ladder, moreover, every rung of this “ladder” (i.e., the part of the curve which illustrates the leap-like growth of taxes), as a rule, coincides with the participation of the United States in world wars and in the period after the Second World War, with the military hostilities in Korea and 84 Table III-1 Tax Revenue of the Federal Budget, 1800-1970 fiscal years 1800 fiscal year 1850 fiscal year 1900 fiscal year 1940 fiscal year 1970 fiscal year Total taxes, million dollars, current prices 10 40 528 5,696 195,705 Per capita sum of taxes 2 2 7 43 955 Taxes, percentage of gross national product * * 3 6 20 * No data.

Source: Annual Report of the Secretary of the Treasury on the State of the Finances for the respective years.

Indochina. Thus, tightening the screws of the taxation press is inseparably linked with the growth of militarism. The gigantic sums of money extracted from the many millions of taxpayers were used for financing a number of unproductive operations and first of all the further stepping up of the arms race. It is clear that real progress in the international disarmament negotiations now underway, accompanied by a substantial reduction of military appropriations, could bring substantial alleviation to the American taxpayer. Thus, the steeply rising financial needs of the state dictated a reconstruction of the entire taxation system. In the 19th century indirect taxes—customs duties (which ensured up to half of the entire sum of budgetary revenue), liquor and tobacco excises as well as the income of the post office— played a dominant role in the system of budgetary revenue. But a large share of these taxes displayed comparatively little elasticity with the change in the national income.  [84•1  That is why, notwithstanding the general tendency towards

85 extending the range of goods and services which are taxed, and a growth of excise duties, the share of indirect taxes in the GNP of the USA increased much slower than the share of other fiscal revenues throughout the 20th century.

At present indirect taxes play, in fact, a secondary role in the federal tax revenue system. More than four-fifths of the total revenue comes from direct taxes and above all from individual income taxes and the corporate tax. That is why attention in this chapter will be paid mainly to problems of direct taxation.