Is this cruise tax a head tax, an excise tax, or both?

In the October 6, 2009 Anchorage Daily News editorial "Cruise industry muddies water on head tax," Chip Thoma defends head taxes imposed on cruise passengers. With a head tax, every person pays the same monetary amount, regardless of income. (The tax is paid per person, or per head.) A head tax is also called a poll tax or a lump-sum tax.

This particular tax is also an excise tax. An excise tax is one that is paid on the consumption of a product. In this case, the product is passage on a cruise. Other excise taxes, such as taxes on fuel, cigarettes, or alcohol, are NOT head taxes.

Cruise tourism has been in the news lately, including stories of a lawsuit advanced by the Alaska Cruise Association claiming that the 2006 voter-approved passenger excise tax is illegal. Some recent history will explain what is really going on.

Over a decade ago, Juneau voters approved a local initiative requiring that cruise passengers pay a $5 excise, or head tax. Despite dire industry predictions that the tax would ruin business, more than $40 million dollars has been collected and spent on cruise passenger improvements. Significantly, cruise passenger visitation to Juneau has doubled since the tax was levied, to 1 million a year.

Throughout the world, cruise ports charge taxes to pay for necessary improvements and services for ships and passengers, including wharves, roadways, bathrooms and medical response. Without reasonable taxes, port residents would be forced to shoulder all these improvements. Having passengers pay for needed infrastructure that welcomes 1,000-foot ships and many thousands of cruise tourists daily in a compressed season makes sense for everyone.

In 2006, Alaska voters approved a state initiative by 52 percent to 48 percent that charges cruise passengers a $50 head tax. The tax generates $50 million per year and pays for cruise ship infrastructure in a dozen Alaska cruise ports. The tax also pays for state Ocean Rangers to monitor shipboard pollution control.

Importantly, the cruise companies do not pay any of this head tax. The total tax is paid by passengers when they purchase Alaska cruise tickets. Media reports this summer revealed that Alaska cruise passengers were completely unaware of the head tax. And when asked, most thought the $50 was reasonable and the purposes for the head tax appropriate.

With the economic recession, the gloom-and-doom spokesmen for the cruise industry predicted catastrophe this year. Blame for the upcoming disaster was placed squarely on the 2006 passenger head tax. But the reality was quite different.

The ships were full in 2009. The million passengers who sailed to Alaska this summer spent their discretionary money on budget bus tours, short tram rides and T-shirts, operations that all recorded record revenues. Expensive side trips were down, like flightseeing and whale watching, a result expected in an economic recession.

The obvious lesson is that passengers this summer were happy to visit Alaska, but were unwilling to spend for expensive extras. Another salient point is that the $50 head tax didn't keep anyone from sailing on cruise ships to Alaska in 2009.

A disappointing aspect about cruise taxation is the continual duplicity of the industry. The Miami-based cruisers whine about the tax but refused to comment on cruise-related projects approved for funding this year in the Legislature. Instead, the cruise lines recently filed a lawsuit claiming the tax and some of the funded projects are illegal.

The hypocrisy by the cruisers has been constant. Cruise lobbyists claim the $50 passenger tax greatly impacts their bottom line, yet the 2009 cruise passengers who pay the entire tax are blissfully unaware of it. The industry persists in their divide-and-conquer tactics toward local ports, promising dire consequences to local revenues if the head tax is not repealed. But that very head tax pays for local port projects and allows for more safe and efficient cruise ship visits.

In any discussion of state-to-industry relationships, there are adversarial points that need careful listening and proper resolution. In the case of the cruise industry, the clear reality is that a fair tax on passengers must be charged to pay for vessel-related infrastructure and services. Alaskans also demand that no pollution will be tolerated from the dozens of floating ship-cities. Alaskans want a say in how our communities and productive marine waters are used.

Alaskans statewide are tired of the overblown cruise industry rhetoric. The industry should be active in the legislative finance process that determines project funding instead of filing Hindenburg-style lawsuits.

Juneau resident Chip Thoma is president of Responsible Cruising in Alaska. He has been involved in cruise ship regulation issues for 12 years.

The Chinese head tax imposed by Canada

According to Wikipedia:

Head tax (Canada)
From Wikipedia, the free encyclopedia

The neutrality of this article is disputed. Please see the discussion on the talk page. Please do not remove this message until the dispute is resolved. (April 2008)
The Chinese head tax was a fixed fee charged for each Chinese person entering Canada. The head tax was first levied after the Canadian Government passed the Chinese Immigration Act of 1885. It was meant to discourage Chinese from entering Canada after the completion of the Canadian Pacific Railway. The head tax was ended by the Chinese Immigration Act of 1923, which stopped Chinese immigration except for business people, clergy, educators, students and other categories.[1]
Contents [hide]
1 History
2 Raising the Tax
3 Impact of the head tax
4 End of the head tax
5 Movement for redress
5.1 Liberal Government's proposed foundation
5.2 Conservative Government Apology
6 Today
7 See also
8 References
9 External links
[edit]History

Main article: History of Chinese immigration to Canada
The first major wave of Chinese Immigration into Canada was during 1877 and 1928, consisting of mostly young, literate men who worked in timber or fishing. However, in the early 1880s, some 15,000 labourers were brought from China to do construction work on the Canadian Pacific Railway. They were leaving crushing poverty in China, for heavy work that included dangerous tasks like carrying explosives, for a wage established by the Chinese labour brokers hiring them, that was a third or a half less than their coworkers.[2]
This immigration was large enough — some 3,000 Chinese, when the 1871 census counted only 33,586 in the province — to arouse concern. The province of British Columbia passed a strict law to virtually prevent Chinese immigration in 1878. However, this was immediately struck down by the courts as ultra vires [beyond the powers of] the provincial legislature, because they impinged upon federal jurisdiction over immigration.[3]
As a dominion of the British Empire, Canada tried to discourage, but could not, by its international obligations, completely eliminate, Chinese immigration at its borders.
Canada's federal Chinese Immigration Act of 1885[4] stipulated that all Chinese entering Canada pay a $50 fee, later referred to as a head tax. This was amended in 1887,[5] 1892,[6] and 1900.[7]
Not all Chinese arrivals had to pay the head tax. Some were presumed to return to China after "sojourning" to Canada because of their transitory occupation, or background (students, teachers, missionaries, merchants, members of the diplomatic corps) and were, therefore, exempt from paying this fee.[8][4]
[edit]Raising the Tax

The Government of Canada, under subsequent administrations, increased the tax to $100 and, then, $500, under the Chinese Immigration Act, 1900[7] and the Chinese Immigration Act, 1903, respectively.[8]
In the early 1900s, the value of $500 was two years' salary,[9] or enough to purchase two homes in Montreal,[citation needed] or a 1/4 section of land in many provinces.[citation needed] These taxes went into a Consolidated Revenue Fund and were spent by a government in which the payers had no representation (Chinese were not permitted to vote at the time).[2]
These acts were regarded as examples of anti-Chinese legislation in Canada that were part of general institutional racism against the Chinese in Canada.[9]
The Chinese were the only ethnic group that had to pay a Head Tax to enter Canada, although efforts to impose one on Americans during the colonial period were overruled by the Colonial Office in London. Other Asians, such as the East Indians and the Japanese, were not subject to a Head Tax. There were, however, formal and informal limits to how many Japanese people could immigrate to Canada.[2]
Before the Statute of Westminster 1931, the Government of the United Kingdom controlled Canada's international affairs. Canada could not deter citizens from India, which was still a British crown colony, or Japan, which agreed to the Anglo-Japanese Alliance in 1902. Yet, the Government of Canada made efforts to require citizens of Japan and other British Far Eastern colonies to have to travel by direct voyage only.
[edit]Impact of the head tax

The Government of Canada collected about $23 million in face value[2] from about 810,000 head tax payers, some of the money being used to support Canada's war effort in World War II. The total head tax collected by 1923 has been estimated as equivalent to over $1.5 billion in 1988 dollars.[citation needed]
The head tax system had the effect of constraining Chinese immigration: making labour available for the railroads, and putting limits on the lives of the immigrants. This was in contrast to the goal of exclusion of Chinese immigration altogether, as articulated by contemporary politicions and labour leaders.[8] The system was effective in discouraging Chinese women and children from joining their men, so the Chinese community in Canada became a "bachelor society".[2]
[edit]End of the head tax

The head tax was ended by the Chinese Immigration Act of 1923, which stopped Chinese immigration entirely, though certain exemptions such as those for business owners and others permitted some continued immigration[10] It is sometimes referred to by opponents as the Chinese Exclusion Act, a term also used for its American counterpart.[9]
[edit]Movement for redress

In the 1980s, many Chinese and groups lobbied for a refund of the head tax, and an apology, or formal acknowledgment, from the Government of Canada. The modern era redress movement may be traced back to 1984, when Vancouver Member of Parliament Margaret Mitchell raised in the House of Commons the issue of repaying the racist Chinese Head Tax for two of her constituents. [11]After that, thousands of Head Tax payers and their family members approached the Chinese Canadian National Council (CCNC) and its member organizations across Canada to register their Head Tax certificates and ask CCNC to represent them to lobby the government for redress.[12]
Since 1984, the CCNC has been seeking redress on behalf of the surviving Head Tax payers and their families who have suffered from decades of discrimination as a result of these racist laws passed by the Canadian Government. Over 4,000 Head Tax payers, spouses and descendants entrusted CCNC with representing them in seeking an apology and financial redress.[13] The redress campaign included holding numerous community meetings, gathering support from other groups and prominent people, increasing the media profile, conducting research and published materials, making presentations at schools, etc. CCNC continued to meet with various Multiculturalism Ministers. In 1993, months before a federal election, then Prime Minister Brian Mulroney made an offer of individual medallions, a museum wing and other collective measures involving several other redress-seeking communities. This was rejected outright by the Chinese, Italian and Ukrainian Canadian national groups.
After Prime Minister Jean Chrétien was elected in 1993, his Government openly refused to provide an apology or redress. [12]The following few years saw little major activity although no one gave up on redress, and CCNC and its supporters continued to raise the issue whenever they could, including a submission to the United Nations Human Rights Commission.
Another phase of the redress campaign started in 1999 with the planning and implementation of the court action against the Government. The CCNC argued that the federal government should not be profiting from racism, and that it had a responsibility under the Canadian Charter of Rights and Freedoms and under international human rights law. In addition, the 1988 official apology and compensation (supported by CCNC) for the internment of Japanese Canadians during World War II set a precedent for redressing racially motivated policies. The Ontario court declared in 2001 that the Government of Canada had no obligation to redress the head tax levied on Chinese immigrants because the Canadian Charter of Rights and Freedoms had no retroactive application, and that the case of internment of Japanese Canadians was not a legal precedent for compensating past racist policies. Two appeals in 2002 and 2003 were unsuccessful, [14]but the judge’s supportive words in the original 2001 decision helped to raise awareness and keep up the pressure.
As Prime Minister Paul Martin entered the scene in 2003, there was renewed hope amongst both long-time redress activists and new supporters. The urgency of the situation became the overriding factor as it became clear that there were perhaps only a few dozen surviving Head Tax payers left and maybe a few hundred spouses or widows.
In the years from 2003 to 2006, there were several national events that helped to revitalize the redress campaign. The highlights were the 2003 Last Spike Redress Campaign with the symbolic “last spike” of the Canadian Pacific Railway donated by Pierre Berton to CCNC.[15] In 2004, in response to a submission by the Chinese Canadian Redress Alliance in Montreal, a timely Report by Doudou Diène, United Nations Special Rapporteur on Racism, Racial Discrimination, Xenophobia and Related Intolerance, concluded that Canada should redress the head tax to Chinese Canadians
In the summer of 2005, Gim Wong – an 80-year-old son of a Head Tax payer and a World War II veteran – started his cross-country Ride for Redress on his Harley Davidson motorcycle. [16]The year 2005 also saw the creation of the Ontario Coalition of Chinese Head Tax Payers and Families, which worked closely with CCNC and the B.C. Coalition that was so successful in the early 1990s.
[edit]Liberal Government's proposed foundation
To the surprise of many, on November 17, 2005, a group calling itself the National Congress of Chinese Canadians announced an "agreement" with the out-going Liberal administration to pay $12.5 million for the creation of a new non-profit foundation to educate Canadians about anti-Chinese discrimination. The payments (of the, now, failed, agreement) would have gone to a foundation, not to individuals who had paid the tax, with a specific, pre-condition of "no apology" by the government.
This proposal was instantly met by controversy.
Among other things, the deal had been negotiated without the participation of a number of the most active groups across Canada, including the CCNC.
Accordingly, when the Department of Heritage announced its preliminary agreement on November 24, 2005, funding was suddenly reduced to $2.5 million--most likely the result of fierce and obvious opposition in the broader community. It was also later, revealed that Raymond Chan, the government official claiming to have negotiated with community groups who held no family ties to the issue, purposely misled the government and public that the Chinese community was willing to accept "no apology, [and] no [individual or collective] compensation."
The authors of the unpopular proposal also claimed support of 11 Chinese-Canadian groups. Yet, upon further examination, some of the named groups stated publicly that their names had been used without permission; several other groups listed, did not even exist. The out-going Liberal Government tabled bill C-333 (as a private member's bill) to implement the deal in November 2004, but this bill died when the Government fell on November 28, 2005.
Opposition grew louder in the Chinese Canadian community and, in response, major redress-seeking alliances and coalitions were formed. This marked a major turning point for the Head Tax Campaign across Canada. The public lobby took prominence during and after, the 2006 federal election. In addition, significant, individual efforts in private, would lead to future negotiations with the Conservative Party.
In prior election campaigns in 2004 and 2006, opposition parties, including the New Democratic Party and Bloc Québécois had already stated their support for an apology and redress for the head tax.
On December 8, 2005, Conservative Party leader Stephen Harper released a press statement expressing his support for an apology for the head tax. As a part of his 2006 election platform, Mr. Harper promised to work with the Chinese community on redress should the Conservatives form the next government.[17]
Before ultimately losing the federal election, the out-going Prime Minister and Liberal Party leader Paul Martin issued a half-hearted personal apology on a Chinese language radio program. However, he was quickly criticized by the Chinese Canadian community for not issuing the apology in Parliament and, then, trying to dismiss it completely in the English-speaking media on the very same day.[citation needed] Several Liberal candidates with significant Chinese-Canadian populations in their ridings, including Vancouver-Kingsway MP David Emerson, and the Minister of State (Multiculturalism) and Richmond MP Raymond Chan, also made futile attempts to change their positions in the midst of the 2006 election campaign.
[edit]Conservative Government Apology
The Conservative Party won the election with a minority government, Prime Minister Stephen Harper reiterating his position on the Head Tax issue in a news conference on January 26, 2006:
"Chinese Canadians are making an extraordinary impact on the building of our country. They've also made a significant historical contribution despite many obstacles. That's why, as I said during the election campaign, the Chinese Canadian community deserves an apology for the head tax and appropriate acknowledgement and redress."[18]
Formal discussions on the form of apology and redress began on March 24, 2006 with a preliminary meeting with Chinese Canadians representing various groups (including some head tax payers), Heritage Minister Bev Oda, and Parliamentary Secretary to the Prime Minister Jason Kenney, resulting in the "distinct possibility" of a formal government apology before July 1, 2006 to commemorate the anniversary of the enacting of the Chinese Exclusion Act of 1923.[19]
The meeting was followed by the Conservative government's acknowledgement on April 4, 2006 in its Speech from the Throne that an apology would be given along with proper redress.[20]
From April 21 to April 30, 2006, the Conservative government hosted public, national consultations across Canada in cities most actively involved in the campaign, since it first began: Halifax, Vancouver, Toronto, Edmonton, Montreal, and Winnipeg. They included the personal testimony of elders and representatives from a number of groups, among them, the Halifax Redress Committee; the BC Coalition of Head Tax Payers, Spouses & Descendants; ACCESS; the Ontario Coalition of Head Tax Payers & Families; the CCNC; the Edmonton Redress Committee of the Chinese Canadian Historical Association of Alberta; and, the National Redress Alliance headquartered in Montreal.
On June 22, 2006, Prime Minister Stephen Harper offered an apology and compensation only for the head tax once paid by Chinese immigrants.[21] Survivors or their spouses will be paid approximately $20,000 CAD in compensation. There are only an estimated 20 Chinese Canadians who paid the tax still alive in 2006.[22]
[edit]Today

Currently, the major issues revolve around the content of any future settlement, with the leading groups demanding meaningful redress, not only for the handful of surviving "head tax" payers and widows/spouses, but first-generation sons/daughters who were direct victims.
Some have proposed that the redress be based on the number of "Head Tax" Certificates (or estates) brought forward by surviving sons and daughters who are still able to register their claims, with proposals for individual redress, ranging from $10,000 to 30,000 for an estimated 4,000 registrants.
As no mention of redress for those children was made, the Chinese Canadian community continues to fight for a redress from the Canadian government. A national day of protest was held on July 1, 2006 in major cities across Canada, with several hundred Chinese Canadians joining in local marches.
[edit]See also

Chinese Canadian National Council
National Congress of Chinese Canadians
Anti-Chinese legislation in the United States
Canadian First World War Internment Recognition Fund (www.internmentcanada.ca)
[edit]References

^ James Morton. "In the Sea of Sterile Mountains: The Chinese in British Columbia". Vancouver, BC: J.J. Douglas, 1974.
^ a b c d e Canadiana.org (2005), "Asian Immigration", Canada in the Making, retrieved 2007-09-01
^ Todd, Alpheus (1894), Parliamentary Government in the British Colonies (Reprint ed.), The Lawbook Exchange, Ltd., ISBN 1-58477-617-X Page 194. Reprinted 2006 by The Lawbook Exchange, Ltd.
^ a b Canada. Dept. of Trade and Commerce (1885), Chinese Immigration Act, 1885, retrieved 2007-09-01
^ Canada. Dept. of Trade and Commerce (1887), An act to amend the Chinese Immigration Act, 1887, retrieved 2007-09-01
^ Canada. Dept. of Trade and Commerce (1892), An act to further amend the Chinese Immigration Act, 1892, retrieved 2007-09-01
^ a b Canada (1901), Act respecting and restricting Chinese immigration, retrieved 2007-09-01
^ a b c Vancouver Public Library (2007), Chinese Head Tax, retrieved 2007-09-01
^ a b c Parliamentary Debates, House of Commons, Canada, April 18, 2005, page 1100
^ * James Morton. "In the Sea of Sterile Mountains: The Chinese in British Columbia". Vancouver, BC: J.J. Douglas, 1974. (A thorough discussion of Chinese immigration and life in BC, railway politics and a detailed profile of the political agendas and personalities of the time)
^ Most head-tax families haven't gotten a penny | Straight.com
^ a b Chinese Canadian National Council
^ PRM 2005 - Redressing the Past of the Lo Wah Kui
^ CanLII - 2002 CanLII 45062 (ON C.A.)
^ Redress: Justice In Time - News
^ GungHaggisFatChoy :: Gim Wong completes his "Ride for Redress" in Montreal - flying back to Vancouver for Wednesday
^ Conservative Party Of Canada
^ CCNC Press Release - Chinese Canadians welcome New Year's promise on Head Tax Redress from PM Designate Stephen Harper
^ CTV.ca | Chinese-Cdns. hail promise for head tax apology
^ Throne speech promises crime crackdown, GST cut
^ Canada (2006). "Address by the Prime Minister on the Chinese Head Tax Redress". Government of Canada. Retrieved 2006-08-08.
^ Sympatico / MSN : News : CTV.ca: PM apologizes in House of Commons for head tax
[edit]External links

Transcript of Prime Minister Harper's apology in Parliament
Podcast of government announcement and reactions (Quicktime)
National Post-Chinese Cdns Speak of Anger, Anguish - April 23, 2006
Chinese Head Tax & Exclusion Act Redress in Canada - www.redress.ca
Generasian Website-Redress Campaign www.generasian.ca/HeadTax2005.html
The CCNC Redress Campaign www.ccnc.ca/redress
National Post newspaper article on NCCC's November 17, 2005 announcement
Vancouver Sun newspaper article on Canadian Heritage's November 24, 2005 announcement
CBC British Columbia story on the Head Tax redress controversy, November 28, 2005
The Star newspaper article on CCNC award, November 29, 2005
gughaggisfatchoy.com's blog with advocacy about Head Tax redress
Political debates heats up over Chinese head tax. CBC.ca Canada Votes 2006, January 5, 2006.
HeadTaxRedress.org
Bill C-333 Chinese Canadian Recognition and Redress Act (First Reading), from the Canadian Parliament's Official Homepage, November 15, 2004
Bill C-333 Immigrants of Chinese Origin Exclusionary Measures Recognition Act (Reprinted as amended by the Standing Committee), from the Canadian Parliament's Official Homepage, November 4, 2005. Section 2 (Recognition) and Section 3 (Apology) were deleted after the amendments.

Margaret Thatcher and the Lump-Sum Head or Poll Tax

Great Britain’s Lump-sum Community Charge

Lump-sum taxes had their moment in the sun in Great Britain during the third administration of Prime Minister Margaret Thatcher. Thatcher’s government enacted a law in 1989 requiring local authorities to replace their system of local property taxes based on rental values with a lump-sum head or poll tax.¹ Every adult would now pay the same amount of tax, called the Community Charge, to the local government, with the amount determined by each locality. The only exceptions were students, pensioners and the unemployed, who received 80% rebates on the tax. The Community Charge was instituted in Scotland in 1989 and in England and Wales in 1990.²

PERCEIVED ADVANTAGES OF THE COMMUNITY CHARGE

Thatcher and her Conservative Party colleagues perceived that the Community Charge would have both equity and efficiency advantages relative to the local property taxes. Both advantages arose from the same source – that the Community Charge was a tax levied on the benefits-received principle of taxation.

Equity Advantages

As the name suggests, the benefits-received principle says people should pay directly for the public services they receive from their governments. This is widely viewed as a fair way to levy taxes in capitalist countries because this is how the market asks people to pay for goods and services. If you want the benefits of a particular good or service, you buy it; if not, you do not buy it. Some public expenditures, such as transfers to the poor, cannot be paid for on a benefits-received basis. There would be no net transfers if the poor were taxed for the transfers they received. A different equity principle is needed when designing taxes to pay for transfers. But the idea is that if the benefits-received principle can be applied to particular goods and services, it should be.

Regarding the lump-sum Community Charge, not everyone within a locality receives the same benefits from the local government services. For example, some people do not have children in the local schools. Nonetheless, charging everyone the same tax was felt to be fairer than the existing system of property taxes, under which there had developed a large disconnect between taxes paid and services received. Only 18 million of the 35 million voters in England paid local taxes, and only 34% of the 18 million paid the full rates because there were numerous rebates available. Also, businesses paid 60% of all local taxes yet they had no direct say in local governance.³ The Community Charge was viewed as a much closer approximation to the spirit of the benefits-received principle than the existing property taxes and thus a much fairer tax.

Efficiency Advantages

There were a number of perceived efficiency advantages in basing local taxes more closely on the benefits-received principle. First, the Community Charge would bring the discipline of the marketplace into the public sector by forcing people to pay for the services they receive. Under the existing property tax system, the local officials could pursue their own political agendas, pushing expenditure programs that they desired knowing that the majority would be likely to approve because so many voters would not have pay for the expenditures. Under the Community Charge, in contrast, increases in public expenditures would require increases in taxes for everyone. A majority of voters would no longer agree to programs unless they were willing to pay for them. Second, public officials now had an incentive to contract out some local public services to private firms if the private sector could offer the services more cheaply in order to keep the Community Charge as low as possible. For both reasons, it was felt that the local officials would begin to act more like public administrators giving people the services they wanted at the lowest possible costs rather than as politicians pushing their own favorite programs.

Finally, we noted in Chapter 2 the conjecture by Charles Tiebout that a system of local governments promote efficiency by more closely matching people’s preferences for public services to the public services they actually receive. By tying taxes directly to the public services provided, the Community Charge would encourage what economists refer to as Tiebout sorting. People who like the local public services and are willing to pay for them would move to high-tax/ high-public service communities. Those who were less willing to pay for the local public services would move to low-tax/low-public service communities. As a result, more people would live in communities that more closely matched their preferences for public services, and everyone would be made better off in the process.

THE REACTION

The verdict on the Community Charge came swiftly – it was a disaster. Protestors gathered throughout the land and millions of people refused to pay the tax. A protest in Trafalgar Square involving over 200,000 people escalated into one of the worst riots in British history. Voters held the national government responsible for the tax and the Conservative Party responded in an attempt to remain in power. Just seven months after the enactment of the tax, the government increased the VAT from 15% to 17.5% in order to give each adult a £140 reduction in their Community Charge bill. But the voters made it known that they were still not satisfied⁴, and Thatcher’s plummeting popularity led to a direct leadership challenge from Michael Heseltine. Though he was unsuccessful, Thatcher was damaged past repair and she resigned in 1990. In the leadership election that followed, all candidates promised to repeal the tax, and the eventual victor, John Major, replaced it with the Council Tax in 1993. The Council Tax, still in place today, is a system of local tax rates that were much like the property tax rates that the Community Charge had replaced. Though the Conservative government held on to power until 1997, it arguably never recovered fully from the Poll Tax debacle.

What went wrong? Whenever outrage against a public policy is so broad and vehement as the reaction to the Community Charge was, you can be sure that people’s sense of equity is offended. There is another principle of equity in taxation that is as widely embraced as the benefits-received principle: the ability-to-pay principle. It says that people should pay taxes in accordance with their ability to pay, that is, in accordance with their incomes or wealth. (The ability-to-pay principle is discussed in Chapter 11 of the textbook.) As it happened, the Community Charge led to huge changes in most people’s tax liabilities. Sixty percent of the voters experienced at least a 20% change in their local tax liabilities, with much of the tax burden shifted from high to low-income voters.⁵ This redistribution of the tax burden was seen as highly unfair. The ability-to-pay principle had clearly trumped the benefits-received principle in the public’s view of the fairness of the new head tax.

The perceived efficiency advantages of the Community Charge were obviously not sufficient to overcome the public’s sense that the tax was unfair. A likely reason for this was that any efficiencies resulting from the tax would take some time to evolve, whereas voters immediately experienced the inequity of the tax. In any event, the tax was not in place long enough to test its efficiency properties.

That Britain’s experiment with this lump-sum tax could bring down the Thatcher government so quickly was really quite remarkable. Margaret Thatcher led the government from 1979 to 1990, the longest term of any Prime Minister since 1827, and had been extremely popular until the Community Charge undid her. One suspects that the lump-sum head tax has been relegated to the dustbin of history in light of the British experience.

NOTES:
¹Great Britain has a unitary as opposed to a federal government, so that the national government controls
local tax policies.
² J. Meadowcroft, "The Failure of the Poll Tax and Classical Liberal Political Economy: Lessons for the Future," The Future of Local Government, Institute of Economic Affairs, Blackwell Publishing, Oxford, 2006, p. 25. This example relies heavily on Meadowcroft’s analysis of the Community Charge.
³Ibid., p. 26.
⁴ Ibid., p. 28.
⁵ Ibid., p. 27.

Source: Public Sector Economics by Richard W. Tresch, 2009.

Lump-Sum Taxes / Poll Taxes / Head Taxes

An example of an extremely efficient tax is a lump-sum tax. A lump-sum tax is a tax that is the same monetary amount for every person. For example, a lump-sum tax might require every person to pay $50. The marginal tax rate of a lump-sum tax is equal to zero. If a person earns additional income, he or she does not pay any additional lump-sum tax. A lump-sum tax is very efficient because it does not reduce people’s incentive to work because the tax does not vary with their income. There is also very little administrative burden. The only records that need to be kept are whether each person has paid the tax. For example, the government does not need any information about a person’s income to levy a lump-sum tax.

Lump-sum taxes are also called poll taxes or head taxes because they have been imposed as a prerequisite for voting and are assessed per person (i.e., per head).

According to the Smithsonian National Museum of American History, poll taxes were used in the late 19th and early 20th centuries in the United States by local governments in the former Confederacy and neighboring states as part of an effort to reestablish a society based on white supremacy :

Poll taxes required citizens to pay a fee to register to vote. These fees kept many poor African Americans, as well as poor whites, from voting. The poll tax receipt displayed here is from Alabama:

Denying black men the right to vote through legal maneuvering and violence was a first step in taking away their civil rights. Beginning in the 1890s, southern states enacted literacy tests, poll taxes, elaborate registration systems, and eventually whites-only Democratic Party primaries to exclude black voters.
The laws proved very effective. In Mississippi, fewer than 9,000 of the 147,000 voting-age African Americans were registered after 1890. In Louisiana, where more than 130,000 black voters had been registered in 1896, the number had plummeted to 1,342 by 1904.

Here is a poll tax receipt from Jefferson County, Louisiana in 1917:


It was not until January 23, 1964 that the ratification of the 24th Amendment to the U.S. Constitution made it illegal to use poll taxes as a requirement for voting in federal elections.

AMENDMENT XXIV
Passed by Congress August 27, 1962. Ratified January 23, 1964.

Section 1.
The right of citizens of the United States to vote in any primary or other election for President or Vice President, for electors for President or Vice President, or for Senator or Representative in Congress, shall not be denied or abridged by the United States or any State by reason of failure to pay poll tax or other tax.

Section 2.
The Congress shall have power to enforce this article by appropriate legislation.

See also: "Margaret Thatcher and the Lump-Sum Head or Poll Tax".