WHY THE DANGER OF ‘TAXATION WITHOUT REPRESENTATION’ IS STILL WITH US
In many states – certainly including South Carolina – the state can raise taxes on citizens without even consulting the legislature. If that sounds outrageous, consider the fact that fines and fees are taxes. The raising of fines and fees on citizens by state agencies without legislative approval would seem to violate one of the fundamental principles of the American republic – a principle that dates back to at least the Magna Carta of 1215: no taxation without representation. Citizens are, in effect, being taxed without their elected representative having any knowledge of or practical authority in the matter.
One recent attempt to reform this practice is S.90 (analyzed in our annual guide Best and Worst of the General Assembly – which again we recommend to your attention). The bill would prohibit any state agency from implementing or increasing virtually any fees on the public without specific legislative statutory approval. Legislators would have to approve new fees or fee increases through specific legislation and not just in one broad sweep through the budget. A watered down version of the bill made it into the budget as proviso 117.7. That proviso would have allowed agencies to increase fee without specific legislative approval if the existence of the fee was previously authorized by statute.
Why is this principle – legislative approval of all forms of taxes, including fines and fees – so important? It is important precisely because of the powerful effects the raising of government revenue (taxation) has on citizens’ lives and endeavors. The American founders recognized that while some taxation was necessary for a functioning state, its effects were negative. Chief John Marshall made exactly that argument in the Supreme Court case McCulloch v. Maryland. “That the power to tax,” he wrote, “involves the power to destroy.” Justice Marshall understood that the coercive taking of rewards acquired from the voluntary service of others would naturally provide a disincentive to that service, and so taxation would have a necessarily detrimental effect on society.
The negative effects of revenue generation led the founders to place the taxing power in the legislature, since this was the branch closest and most answerable to the people and also the branch deemed to be the most deliberative and slow to action. Article 1, Section 8, Clause 8 of the U.S. Constitution reads: “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States.” No other branch, and certainly no bureaucracy of the executive branch, is afforded this power.
Indeed, erasing all doubt as to who has the power to tax under the Constitution, James Madison, addressing the Virginia ratifying convention, asked: “Does it mean that the sword and purse ought not to be trusted in the hands of the same government? This cannot be the meaning; for there never was, and I can say there never will be, an efficient government, in which both are not vested. The only rational meaning is, that the sword and purse are not to be given to the same member [i.e. branch].”
When the power to issue and enforce the law is concentrated in the same source, the result is a form of tyranny. The founders understood the destructive effects of concentrated power and appreciated the necessarily adverse effects of taxation; and that is why they insisted that the power to tax should only lie with the institution of government most directly representative of the people. South Carolina legislators should heed their wisdom.