Tax

While the opponents of Reconstruction were painting themselves as staid and respectable fiscal conservatives, they were simultaneously engaged in a radical plan to subvert democratic elections across the South. In principle, the Redeemers’ open campaign of voter suppression, political intimidation, and violence risked further federal intervention, but the North was losing the will to defend black political freedom. In fact, wealthy Northerners—even those who had been strongly anti-slavery—began doubting the logic of universal male suffrage as it empowered the immigrant working class in their cities. The political identity of the “taxpayer” was born in this reaction to black freedom and working-class political power, and it has existed ever since to oppose the specter of a multiracial working-class alliance.

Called together by the Charleston Chamber of Commerce and the Charleston Board of Trade, the Tax-Payers’ Convention of South Carolina met in Columbia in May 1871 and again in February 1874 to seek, “for the holders of property and the payers of taxes, a voice and a representation in the councils of that State.” They had a duty to speak up, the Tax-Payers argued, because the state of South Carolina was suffering from “the fearful and unnecessary increase of the public debt”; “wild, reckless and profligate” spending; and “excessive taxation.”

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Emphatic color-blindness was, to say the least, a recent development in the public rhetoric of South Carolina’s white elite. As recently as 1868, a number of Tax-Payers had signed a petition to the U.S. Congress, entitled a “Respectful Remonstrance on Behalf of the White People of South Carolina,” that opposed black male suffrage because “the superior race is to be made subservient to the inferior.” Porter himself had argued that black people had “traits, intellectual and moral,” and “credulous natures” that left them with an “incapacity” to rule.

At their Tax-Payers’ Conventions, however, these same men, despite sporadic remarks on the “negro character,” no longer officially identified themselves as advocates on behalf of the white race; they were simply representatives of the “over-burthened tax-payers.” This self-appointed role was ironic: as slaveholders, the Southern elite had done everything in their power to cripple the tax capacity of both their states and the federal government. Now, the South Carolina Tax-Payers called into question the right of black people and poor whites to govern because they believed these voters did not pay a substantial amount of taxes. “They who lay the taxes do not pay them, and that they who are to pay them have no voice in the laying of them,” Porter asserted, wondering if “a greater wrong or greater tyranny in republican government” could be conceived.

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It is no coincidence that when the Jim Crow laws were finally dismantled, the reaction to the civil rights movement once again featured paeans to “the taxpayer” and a new wave of tax limitations. The rhetoric of the taxpayer is readymade to call into question the right of black and poor Americans to participate in or benefit from their government. The taxpayer was the foil to Reagan’s welfare queen, who he claimed had a “tax-free cash income” of $150,000 a year. Reagan’s story was a fiction—he’d change the numbers from speech to speech—but that hardly mattered. Talking about taxes allowed voters to put a dollar figure on their resentments, and to experience the poverty of others as persecution.

While negative gearing gets all the hate, it really was John Howard who destroyed our housing market by handing out a big tax-free gift to property investors.

Prior to June 2000, if you made a capital gain (ie a profit from an investment) you discounted the profits by the level of inflation over the period of the investment before paying tax.

Then Howard (and Costello) changed it to being a straight 50% discount.

If you bought a property for $500,000 and 10 years later you’re able to sell it for $1m at a profit of $500,000, rather than pay tax on the whole $500,000, you only pay tax on $250,000. The other $250,000 is yours, tax free.

That is about as sweet as it gets.

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At some point you have to admit what you’re doing has not worked. Or perhaps we need to admit that the aim all along was higher house prices.

Howard infamously said in 2003: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.”

The tax policies he put in place worked. They ensured house prices would go up much faster than income and reduce affordability. Maybe it’s time to admit that if we keep them in place that situation will continue.