Time: Wed Feb 19 17:42:23 1997
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Date: Wed, 19 Feb 1997 17:35:31 -0800
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From: Paul Andrew Mitchell [address in tool bar]
Subject: SLS: Very excellent history on taxes and a call for repeal of
16th Amendment (fwd)
<snip>
>On Tue, 18 Feb 1997 12:02:34 -0500 (EST), Emmilene@aol.com wrote:
>
>
>-> SearchNet's SNETNEWS Mailing List
>
>After reading this, I propose a tax revolt by all Americans.
>We have to, in order to regain fiscal sanity and return to the original
>constitutional concept of running our government. The biggest scam in
>history has got to come to an end. We have been led down the garden path by
>the richest people in the world. It's time to call a halt to it. Only with
>knowledge and unity will we abolish the chains that have been enslaving us
>to them.
>
> THE TIME HAS COME TO CALL AN END TO
>
> ENSLAVEMENT *********N0W
>Post this everywhere, send it to everyone you know, tell them to resend it
>on, lets take a lesson from our founders, a tax revolt is our heritage,
>lets use it NOW, this year, once and for all.
>
>
> BEFORE THE INCOME TAX
> by G. Edward Griffin
>This report is adapted from two earlier articles by G. Edward Griffin
>appearing in the April 13. 1987 and February 29, 1988 issues of THE NEW
>AMERICAN (1-800-727- 8783 http//www.jbs.org). Mr. Griffin, a journalist and
>film producer, is the author of The Creature From Jekyll Island: A Second
>Look at the Federal Reserve (see ad on the opposite page).
>
>It is a sobering thought that the federal government could operate even at
>its current level of spending without collecting any taxes whatsoever. All
>it has to do is create new money through the Federal Reserve System, a
>process called monetizing the debt. As a matter of fact, much of the money
>it now spends is obtained that way. The politicians who authorize that
>process know that this is not true debt, because no one in Washington
>really expects to repay it. It is merely a means of raising money to run
>the government without increasing taxes. Actually, the inflation that
>results from monetizing debt is just as much a tax as any other, but,
>because it is hidden and so few Americans understand how it
>works, it is far easier to collect than a tax that is out in the open.
>
>So the question arises: Why does the federal government bother with taxes
>at all? Why not just operate on monetized debt? The answer is twofold.
>First, if it did, people would begin to wonder where the money is coming
>from, and that might cause them to wake up to the reality that inflation is
>a tax. Thus, open taxes, at some level at least, serve to perpetuate
>public ignorance regarding the reality of deficit spending. But the second
>reason is more to the point of this report. It is that taxes, particularly
>progressive taxes, are weapons by which social planners can wage war on one
>class of citizens for the benefit of another.
>
>TOOL FOR SOCIAL PLANNING
>The January 1946 issue of American Affairs carried an article by Beardsley
>Ruml, who at the time was chairman of the Federal Reserve Bank of New York.
>Ruml devised the system of automatic withholding during World War II. so he
>was well qualified to speak on the nature and purpose of the federal income
>tax. His theme was spelled out in the title of his article: "Taxes for
>Revenue Are Obsolete."
>
>In the introduction to the article, the magazine's editor summarized that
>Ruml's "thesis is that, given control of a central banking system and an
>incontrovertible currency [a currency not backed by gold], a sovereign
>national government is finally free of money worries and need no longer
>levy taxes for the purpose of providing itself with revenue. All
>taxation, therefore, should be regarded from the point of view of social
>and economic consequences."
>
>Ruml explained that, since taxes are no longer needed to raise revenue for
>the government, there are only two purposes remaining. The first of these
>is to combat increases in the general price level. When people have money
>in their pockets they will spend it for goods and services, and this will
>bid up prices. The solution, wrote Ruml, is to take the money away from
>them and let the government spend it instead. This, too, will bid up
>prices, but never mind about that. Ruml explained it this way:
>
>The dollars the government spends become purchasing power in the hands of
>the people who have received them. The dollars the government takes by
>taxes cannot be spent by the people, and therefore, these dollars can no
>longer be used to acquire the things which are available for sale. Taxation
>is, therefore, an instrument of the first importance in the administration
>of any fiscal and monetary policy.
>
>The other purpose of taxation, according to Ruml, is to redistribute the
>wealth from one class of citizens to another. This must always be done in
>the name of social justice or equality, but the real objective is to
>override the free market and bring society under the control of the master
>planners. Ruml said: The second principal purpose of federal taxes is to
>attain more equality of wealth and of income than would result from
>economic forces working alone. The taxes which are effective for this
>purpose are the progressive individual income tax, the progressive estate
>tax, and the gift tax. What these taxes should be depends on public policy
>with respect to the distribution of wealth and income. These taxes should
>be defended and attacked in terms of their effect on the character of
>American life, not as revenue measures.
>
>Ruml's view will not be startling to anyone familiar with how the income
>tax came into existence. Beginning with the War Between the States, the
>Marxist philosophy of class conflict became manifest in America. Many
>people wrongly believe that Marxism is a battle of the poor against the
>rich. In reality, it is a campaign against the middle class the class that
>Karl Marx called the bourgeoisie. In The Communist Manifesto, Marx
>wrote:
>"The distinguishing feature of Communism is, not the abolition of private
>property generally, but the abolition of bourgeois property." In order to
>accomplish this, he called for a "heavy progressive or graduated income
>tax."
>
>SOAKING THE RICH?
>Once this concept of class warfare had been transplanted to America, it
>found nourishment in the labor movement and eventually blossomed into a
>powerful political movement known as populism. The populists claimed that
>the farmers and the urban working class were being exploited by rich
>industrialists, largely through the unfair way in which taxes were levied.
>At that time, the nation's revenue was drawn primarily from internal excise
>taxes on the sale of such items as tobacco and liquor, and from tariffs on
>imports. Today, tariffs are viewed as a means of protecting jobs for
>American workers, but in the political debates of the 1890s they were seen
>as subsidies for big business, a means of protecting them from the rigors
>of foreign competition, thus allowing bloated profits that would not
>be possible without political protection. Furthermore, since these tariffs
>were passed along to the consumer in the form of higher prices, they were
>viewed as nothing but a tax levied against the little man to perpetuate the
>unearned profits of the rich.
>[Although sometimes referred to as a populist, Patrick Buchanan's position
>for protectionist tariffs runs contrary to the turn-of-the-century
>populists, who wanted to replace tariffs with an income tax.]
>
>The populists advocated the elimination of tariffs and the institution in
>their place of a progressive income tax. The move was perceived as an act
>of justice and revenge. The rich, at long last, were going to be forced to
>pay their fair share and more. In the House of Representatives, Congressman
>Thomas J. Hudson of Kansas expressed the prevailing populist sentiment: "I
>know that many wealthy men are generous and charitable.... On the
>other hand, the majority of the very wealthy are haughty, overbearing,
>autocratic, mean, and it is that class in particular that the income tax is
>designed to reach."
>
>Yes, working, middle class Americans were in the firm majority, and any
>politician who promised to "soak the rich" was assured of victory at the
>polls. How ironic it was that those same politicians came from some of the
>wealthiest families in the world. Little did the common voters realize that
>in their greed to shift the tax burden to others, they were, in fact,
>placing that burden more heavily on themselves.
>
>Our "progressive" income tax is not progressive at all. In fact, it is not
>even proportionate. If we had a flat-rate income tax with no exemptions or
>deductions, a person with 20 times the income of another would pay 20 times
>as much tax. By contrast, a progressive or graduated income tax may require
>a person with 20 times the income of another to pay considerably more than
>20 times as much tax. But the way it was designed to operate is quite
>different. The same year that the income tax was adopted, Congress also
>created the tax-exempt foundation, a device whereby, under cover of charity
>and education, those family dynasties with great wealth can avoid paying
>either income tax or inheritance tax, while their fortunes remain under
>their control and continue to operate for their benefit.
>
>Not far behind the super rich come the very rich, who also share in the
>spoils system. Over the years, the tax laws have become twisted and turned
>into a Gordian knot of exemptions, deductions, depreciations, shelters, and
>credits. Those with sufficient wealth can well afford to hire professionals
>to trace these convoluted paths, but the common man must be content with
>"standard" deductions and the crumb of a "simplified" tax return.
>
>The federal income tax was never meant to treat all citizens alike. It will
>never be fair because it was designed to be unfair. Furthermore. it is
>difficult to imagine a tax that is more cumbersome and expensive to
>administer. So that each individual's income may be determined. the
>taxpayer must produce documentation on every aspect of his
>financial life. In order to assure compliance, a virtual army of agents,
>auditors, and computer technicians must be maintained at public expense. In
>the dust of this roving army are the hordes of camp followers, the
>accountants and tax attorneys, all of whom consume massive chunks
>of the national wealth without producing anything except paperwork and
>procedures just to measure income. In the process, every detail of our
>lives is recorded and made available to the bureaucracy. The right to
>privacy and protection against arbitrary search and seizure is trampled
>underfoot.
>
>The income tax cannot be reformed. Its heart and soul are favoritism. Its
>muscle is political power. Its nature is waste and tyranny. It must be
>completely replaced.
>
>But what should replace it? The world has been exposed to just about every
>kind of tax imaginable at some point in history. Nations have tried
>property tax, production tax, excise tax, import tax, manufacturing tax,
>carriage tax, window tax, chimney tax, liquor tax, tobacco tax, income tax,
>sales tax, value-added tax, and even a tax on death. The results have
>almost always been the same. The taxes become despised by the
>people and often lead to revolt or civil war.
>
>PAST PRECEDENT
>Fortunately, in our search for a fair tax that raises sufficient revenue,
>we do not have to begin from scratch. It may come as a surprise to learn
>that much of the work has been done and that the bulk of the plan has been
>drafted. Furthermore, it has actually been tested in America and found to
>be entirely workable. Where is this plan to be found? It is hidden where it
>is most unlikely to be discovered by the general public or Congress. It is
>in the Constitution of the United States.
>
>After the Revolutionary War was won there was no way the colonists were
>going to create a new centralized government with the power to tax. They
>had had enough of that with England. So when the Articles of Confederation
>were finalized, they granted no taxing power at all. Whatever was needed
>had to be requested from the states, and the states were under no firm
>obligation to pay. Within a few years the impracticality of this
>arrangement was painfully obvious. The federal government had almost no
>funds with which to operate and, in fact, Congress did absolutely nothing
>for four years.
>
>It is possible that the United States would have disintegrated into 13
>separate nations with no way to protect themselves from foreign aggression
>had it not been for a series of tax revolts within the states. The most
>famous of these was Shay's Rebellion of 1786-87 in Massachusetts. In
>protest over excessive taxes levied by the state, a brigade of 2,000
>armed insurgents blockaded the Springfield courthouse. The band was
>eventually dispersed by a few cannon volleys, but the incident served to
>dramatize the fact that none of the states was really prepared for military
>action on any sizable scale. The disturbance emphasized the need for a
>stronger central government, and a convention was called for the purpose of
>revising the Articles of Confederation.
>
>CONSTITUTIONAL CONVENTION
>Once the convention was assembled in Philadelphia, the delegates quickly
>abandoned the idea of trying to revise the Articles. They were too flawed
>for repair. Everyone now agreed that the central government simply could
>not function unless it had some power of taxation. But what would that
>power be?
>
>The overriding concern for all was that the new tax must act equally on the
>majority and the minority. Regardless of which citizens might find
>themselves in the majority, they must not be allowed to tax others in any
>way beyond what they tax themselves. There was unanimous consent on this
>principle.
>
>Another principle was a direct outgrowth of the tradition of no taxation
>without representation. The colonists had just fought a war to establish
>that point. Conversely, if one has representation, then he must pay taxes.
>Since the whole purpose of representation was to consent - or object to -
>the levying of taxes, it follows that no one should have a voice in these
>matters who is not paying those taxes. All citizens are entitled to equal
>protection under the law, but only those who pay taxes shall be entitled to
>vote.
>
>In an attempt to apply these broad principles of taxation, the convention
>delegates struggled with very practical problems. The seaboard states with
>extensive commercial shipping were reluctant to give up their right to
>collect import duties, because it was their main source of revenue. Those
>from the industrialized areas were fearful of taxes placed on
>manufacturing. Those from the agricultural provinces were hostile to land
>taxes. All parties were convinced that sooner or later a political majority
>would seize control and force them. as a potential minority, into tax
>servitude. After months of debate. it began to appear that the states were
>in hopeless deadlock. Then - many are convinced it was by divine
>intervention - a compromise was reached. No, it was more than a
>compromise. It was an absolutely brilliant plan for taxation.
>Unfortunately. it was never given a formal name. Those who drafted it were
>content merely to describe it in terms of its features. For the purposes of
>this report, however, we shall call it the "Uniform Apportionment Tax."
>
>The Constitution acknowledges two kinds of taxes: direct and indirect.
>Direct taxes, as the name implies, are charged directly to the person who
>ultimately pays them. Examples of direct taxes are income and property
>taxes. Although they may be thought of as taxes on income or on property,
>remember that only people pay taxes: Money and property do not.
>Direct taxes, therefore, regardless of what they may be based on are
>charged directly to the ultimate taxpayer. Indirect taxes, on the other
>hand, are levied on a commodity with the expectation that the taxes will be
>passed along to the consumer as part of the market price of the commodity.
>Examples of indirect taxes are import ant excise taxes. The taxpayer always
>knows when he is paying a direct tax, but is often unaware of the indirect
>tax.
>
>DANGER OF DIRECT TAXES
>Direct taxes were viewed by the Founding Fathers as dangerous because they
>give government great power over its citizens and also because, in order to
>assess such taxes, agents must have the authority to snoop into the private
>lives of the citizens. They agreed, therefore that direct taxes are safer
>if administered by the states, where elected representatives are closer to
>the people and easier to control.
>
>Indirect taxes, on the other hand were viewed as less dangerous, because
>people could avoid them if they wanted merely by not purchasing the items
>being taxed. This assumes the establishment of taxes only on those items
>the are considered nonessential, such as liquor and tobacco, often called
>luxury taxes. Furthermore. the process of collecting indirect taxes does
>not endanger the individual's right of privacy.
>
>For these reasons, the delegates to the Constitutional Convention agreed
>that indirect taxes would be more appropriate for the federal government.
>The compromise that allowed the states "to form a more perfect union"
>consisted of two provisions:
>
>1 ) The federal government was to derive its primary revenue from indirect
>taxes, and these were to be uniform in all states.
>
>2) In the event of war or similar emergencies, the federal government, with
>the consent of Congress, would have authority to levy direct taxes "passed
>through" the states to their citizens, but these were to be proportional to
>the number of representatives that each state had in Congress.
>
>This process is called apportionment. In other words, if there were 100
>representatives in Congress, and the state of Virginia had seven of them,
>the voters in Virginia would have to pay seven percent of the direct
>national emergency tax. The specific wording establishing the Uniform
>Apportionment Tax is found in Article I of the Constitution, and specifies:
>
>Representatives and direct taxes shall be apportioned among the several
>states which may be included within this Union.... 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; but all duties, imposts and excises shall be uniform throughout the
>United States.... No capitation [a head tax, sometimes called a poll tax],
>or other direct, tax shall be laid, unless in proportion to the census or
>enumeration herein before directed to be taken.
>
>A sample of the extensive historical record of the founding era
>demonstrates the reasoning of the men who created the concept. Alexander
>Hamilton, who was to become the first Secretary of the Treasury, wrote in
>The Federalist, #21:
>
>Imposts, excises, and, in general, all duties upon articles of consumption,
>may be compared to a fluid, which will in time find its level with the
>means of paying them. The amount to be contributed by each citizen will in
>a degree be at his own option, and can be regulated by an attention to his
>resources. The rich may be extravagant, the poor can be frugal; and private
>oppression may always be avoided by a judicious selection of objects
>proper for such impositions.... If duties are too high, they lessen the
>consumption; the collection is eluded; and the product to the treasury is
>not so great as when they are confined within proper and moderate
>bounds.... Impositions of this kind usually fall under the denomination of
>indirect taxes, and must for a long time constitute the chief part of the
>revenue raised in this country. Those of the direct kind, which principally
>relate to land and buildings, may admit of a rule of apportionment.
>
>EMERGENCY MEASURE
>It was a cardinal point to these discussions that the power of direct
>taxation through apportionment was to be exercised only to pay for debt
>incurred as a result of war, insurrection, or similar emergencies, but not
>for the normal operation of the federal government. That function was to be
>financed by indirect taxes alone. James Madison commented:
>
>When, therefore, direct taxes are not necessary, they will not be recurred
>to.... It can be of little advantage to those in power to raise money in a
>manner oppressive to the people....
>Direct taxes will only be recurred to for great purposes.... If this
>country should be engaged in war - and I conceive that we ought to provide
>for the possibility of such a case - how would it be carried on?... How is
>it possible a war could be supported without money or credit? And would it
>be possible for a government to have credit without having the power of
>raising money? No; it would be impossible for any government, in
>such a case, to defend itself. Then I say, sir, that it is necessary to
>establish funds for extraordinary exigencies, and to give this power to the
>general government.
>
>To the Founding Fathers, the primary purpose of apportionment was to block
>the central government from using the power of direct taxation - except in
>times of great national emergency. The barrier was not in the formula of
>distributing the tax load among the states, but in the procedure for doing
>so. To lay a direct tax, Congress had to do certain things that no
>government wants to do. Since each tax is a separate project, each would
>have to be written into a revenue act. The purpose and the amount of the
>tax would have to be clearly stated, and then debated and voted upon. When
>the tax was collected, the revenue act would expire, and the door to more
>money would be closed.
>
>How different this is from the ongoing power of general taxation, under
>which the purpose is seldom known, the amount is always in doubt, and the
>process is endless. The rule of apportionment, therefore, was the greatest
>restraint on the power and reach of government that had yet been devised by
>man, and it is little wonder that it became a thorn in the side of federal
>politicians in the years to follow.
>
>Of course, the Uniform Apportionment Tax was not flawless. In truth, there
>can never be a perfect tax if the people cannot afford it. When Hamilton
>became the first Secretary of the Treasury, he persuaded Congress to
>authorize the nation's first indirect tax. It was an excise on whiskey, a
>few luxury items, auction sales, and negotiable instruments. It was
>excellent in theory, but it was a heavy tax - resulting in a whopping 25
>percent increase in prices - and it led to a full-scale revolt. Rumors
>quickly spread that the government was about to extend these taxes to all
>articles of consumption, including food and clothing.
>This would be the European experience all over again. Excessive excise
>taxes were what had driven many immigrants to seek refuge in America. So it
>is not surprising that this first experiment was met with large-scale
>public resistance.
>
>The biggest ruckus came from the Western farmers. Because there was a
>shortage of money along the frontier, it had become common to use whiskey
>as a medium of exchange. Grain was too bulky for transport, so the farmers
>grew rye, distilled it into whiskey, and moved their produce into national
>trade in that form. For the frontiersman, therefore, a tax on whiskey was
>not an excise tax or luxury tax at all. It was a 25 percent tax on their
>basic crop, and they complained that no other farmers and no
>other producers of manufactured goods had to pay a similar tax - which was
>quite true. By 1794 the entire region was in open revolt. Tax collectors
>were tarred and feathered and their houses were burned to the ground. When
>a judge of the Supreme Court declared a state of insurrection in western
>Pennsylvania, President Washington called out the militia from adjacent
>states and, in a show of force, led these troops in full-dress uniform.
>
>Fortunately, military confrontation was averted: The rebels surrendered in
>return for amnesty, no one went to jail, and within a few months the excise
>tax was repealed.
>
>
>FIRST DIRECT TAX
>In 1798, Congress levied its first direct tax. It was in the amount of $2
>million and was apportioned among the states on the basis of the current
>census. which was also the basis for the number of representatives each
>state had in Congress. The purpose of the tax was to extinguish part of the
>debt incurred by the Revolutionary War. Reduction of the national debt was
>viewed as one of those rare emergencies that would justify resorting to
>the extreme measure of a direct tax. In this case, the tax was levied on
>dwellings, land, and slaves. It did not provide for any deductions or
>exemptions, but, sadly, it was progressive in nature, with larger homes
>paying more per $100 of value than others.
>
>Herein lay one of the hidden flaws in the tax concept of the Founding
>Fathers. They had inherited the feudal concept of noblesse oblige, the
>obligation of noblemen to take care of their inferiors and assume greater
>responsibility of government. By 1776, however, especially in America, this
>concept had lost its virtue. In a republic such as ours, there is
>no justification for allowing class distinctions into the law - and that
>includes tax law. If one class can be exempted from taxes on the basis of
>class, rank, or wealth, then that same group can be singled out later for
>extra taxes on the same basis, depending merely on the
>political majority at the time. The principle of taxing those with wealth
>at a higher rate than others must have seemed harmless at the time -
>perhaps even humanitarian - but it was destined to fester into a huge boil
>that would torment Americans for many generations to come.
>
>All of these issues aside, the fact remains that the first direct tax in
>the United States was entirely constitutional. Congress had stated the
>purpose and the amount. It had been debated and passed. Most important,
>once collected, the tax would expire. In spite of these constraints,
>however, the tax met with considerable resistance and, in
>fact, soon led to a second revolt, this one among German settlers along the
>Eastern Seaboard. Pennsylvania's quota of the $2 million tax was $273,000,
>which fell mainly on land and houses. The valuation of houses was estimated
>by counting the number and size of windows, a practice inherited from
>England. But when the tax assessors arrived, the German residents thought
>they were reviving the hated European hearth tax They organized into small
>bands and set out to assault the assessors and drive them from the
>district, which they did in short order. When some of the rebels were
>arrested and put into prison, an auctioneer named John Fries led a march on
>the courthouse and freed them. President John Adams once again called out
>the militia. Fries was captured, tried, and convicted of treason, but later
>received a presidential pardon.
>
>EARLY DECENTRALIZATION
>By the time Thomas Jefferson became President, the nation had already
>experienced two uprisings over taxes - small to be sure, but revolts
>nonetheless. Hamilton and Adams had wanted to forge ahead with a powerful
>central government, and for this they needed revenue. The political tide
>now turned back to Jefferson's views of limited government. In
>his first Annual Message, Jefferson urged repeal of all internal taxation
>and a return to a reliance on tariffs alone. He said:
>
>Considering the general tendency to multiply offices and dependencies and
>to increase expense to the ultimate term of burden which the citizen can
>bear, it behooves us to avail ourselves of every occasion which presents
>itself for taking off the surcharge; that it may never be seen here that,
>after leaving to labor the smallest portion of its earning on which
>it can subsist, government shall itself consume the whole residue of what
>it was instituted to guard.
>
>Jefferson was not just making a speech to please the voters. He followed
>through. He cut government spending to the bone and even put much of the
>Navy into dry-dock. Meanwhile, Treasury receipts from tariffs were growing
>rapidly with the expanding nation. Lower taxes left the consumer with more
>money to buy imported goods. Jefferson proved his point. At the end of his
>term, the government actually had a surplus and had accelerated repayment
>of the federal debt -all as a result of tariffs alone.
>
>The second time a direct tax was levied in accordance with the
>apportionment requirements of the Constitution was in 1813, principally to
>pay for the War of 1812. Another direct tax was assessed two years later
>for the same purpose. The first was for $3 million and the second for $6
>million. The terms of assessment and proportion among the states were
>similar to those of the first revenue act. One interesting variation,
>however, was that the states were given the option of levying the tax
>entirely on their own according to whatever method of distribution they
>wished, saving the federal government the expense of administering the
>project. The states could take a 15 percent discount if they paid within
>six months, and a ten percent discount if they paid within nine months.
>
>The first part of the 19th century was a period of great growth and
>prosperity for the United States. Excise taxes had been repealed, and the
>debts of war had been repaid. By and large, the central government was weak
>regarding internal affairs, which meant that the people were strong. The
>bureaucracy stayed out of the way and let Americans get on with their
>lives. Commerce flourished wealth was created, and the standard of
>living for the common man soared. The Old World watched in amazement and
>envy. Then, with the War Between the States, the long retreat from
>greatness began.
>
>With the outbreak of war between the northern and southern states, there
>was urgent need on both sides for massive armies and equally massive
>funding. In the South, almost the entire amount was raised by fiat money -
>paper bills with no backing in gold or anything of tangible value. In the
>North, however, Congress struggled to raise revenue in accordance
>with the Constitution. War was exactly the kind of "exigency" foreseen by
>the Founding Fathers when they established the principle of apportionment.
>So on August 5, 1861, Congress enacted the nation's fourth direct-tax
>revenue bill for the stated amount of $20 million. It was similar to the
>previous bills except that this time slaves were no longer taxed as
>property - only land, "improvements," and dwellings. The big
>departure, however, was that it also contained a provision to tax incomes.
>Congress did not like the idea of having to get taxes on a piecemeal basis.
>It wanted a continual flow of income without having to justify its specific
>purpose and without stated amounts. It looked for a way to bypass the
>apportionment process.
>
>But how? All direct taxes had to be apportioned. That is what the
>Constitution mandated. The solution was easy: Since an excise tax is an
>indirect tax and does not have to be apportioned, they simply redefined the
>income tax as an excise tax.
>
>The "excise" tax was a flat three percent of all income over $800 a year.
>Considering that the per capita income at that time was only about $150,
>that was a substantial exemption. Putting aside the merits or demerits of
>an income tax in general, we are dealing here with the concept of
>exemptions from that tax. This is, once again, the feudal
>tradition of noblesse oblige, but under a slightly different form. It is
>directly contrary to the concept of taxation with representation. If some
>are exempt from the tax, for whatever reason, and if they continue to have
>representation, then those who do pay it are denied an increment of
>consent and representation which is in direct proportion to the exemption.
>
>INFLATION TAX
>In retrospect, the war-emergency income tax proved to be a relatively
>unimportant source of revenue. By far the greater part came from government
>debt and fiat money, which, incidentally, also was contrary to clear
>provisions of the Constitution. The Lincoln Administration raised a total
>of about $2.7 billion in bonds and "greenbacks." The direct tax on property
>pulled in about $17 million. The income tax, over the ten-year period it
>remained in force, raised about $347 million. Wars are seldom financed out
>of tax revenue alone. Inevitably, they are funded by government debt, the
>monetization of which causes inflation - a form of taxation few people
>understand. Americans in the northern states paid, in addition to the
>property tax, a hidden tax of a full one-half of all their savings as a
>result of a 50 percent decline in the purchasing power of their money
>during that period.
>
>America's first income tax was sold to the citizens as a temporary
>necessity, a wartime emergency. As such, it contained a date for its own
>termination. As is often the case in such matters, Congress managed to
>extend it a few years longer, but it finally did expire in 1872. By this
>time, however, the theories of Karl Marx were sweeping through
>the intellectual and educational institutions of America and the populists
>were capturing political power. Politicians dreamed longingly of a
>permanent income tax because of the bountiful stream of revenue that would
>flow from it. But the masses also were fascinated with the progressive - or
>"graduated" - feature because it gave expression to their envy of
>the rich and salved their sense of hurt over high protective tariffs.
>Senator William Peffer of Kansas expressed this prevailing mood:
>
>Wealth is accumulated in New York, and not because those men are more
>industrious than we are, not because they are wiser and better, but because
>they trade, because they buy and sell, because they deal in usury, because
>they reap in what they have never earned, because they take in and live off
>what other men earn.... The West and the South have made you people rich.
>
>HIGH COURT SPIKE
>With pressure from both the public and the politicians for a progressive
>income tax, who could stand in the way? But five men did do exactly that.
>They were Justices of the Supreme Court.
>
>In 1893, President Grover Cleveland jumped on the populist bandwagon,
>asking Congress to lower tariffs and make up for lost revenue by taxing the
>income of corporations. The bill was expanded to include personal incomes
>as well and passed through Congress the following year. Before it even went
>into effect, however, it was declared unconstitutional by the Supreme
>Court. In the case of Pollack v. Farmer's Loan and Trust Co., the High
>Court declared that a tax is not lawful if it is levied on income from
>investments, because that would be the same as a tax on property. As such,
>it is a direct tax, which according to the Constitution must be levied in
>accordance with the rule of apportionment.
>
>At the time of this ruling, the populists were in firm control of the
>Democratic Party and were making inroads into the Republican ranks as well.
>They castigated the Supreme Court as a tool of the rich and an enemy of the
>people. President Theodore Roosevelt advocated a progressive inheritance
>tax in 1906, and in his 1908 message to Congress called for a new income
>tax, suggesting that it be worded in such a way as to prevent the
>Supreme Court from striking it down. When William Howard Taft became
>President, the political winds were at gale force. It was no longer a
>question of if an income tax was to become law, only of how.
>
>In April 1909, Senator Joseph Bailey, a wealthy Democrat from the South,
>introduced an income tax bill that he expected to be opposed by the
>Republicans. But the Republicans decided to steal the show by introducing a
>plan of their own. Under the leadership of Senator Nelson Aldrich of Rhode
>Island, and with the help of President Taft himself, they proposed an
>amendment to the Constitution as a means of circumventing the
>Supreme Court. It is sometimes claimed that these men were secretly opposed
>to an income tax and resorted to this stratagem merely to appease populist
>sentiment, while hoping that the amendment would never be ratified by
>three-fourths of the states. There is ample reason, however, to believe
>that they proposed the amendment because they truly wanted it.
>
>Aldrich, in particular, is highly suspect in this role. His daughter,
>Abbey, was married to John D. Rockefeller Jr., and Aldrich was the man who
>arranged the secret meeting on Jekyll Island in Georgia in November 1910
>that led to the creation of the Federal Reserve System. He also played a
>pivotal role in making sure that the income tax law did not apply
>to foundations. This made it possible to shift the tax burden to the middle
>class by allowing tax-exempt status to the great fortunes of such families
>as Rockefeller, Morgan, Carnegie, and Aldrich.
>
>MODERN SERFDOM
>At the very least, it must be concluded that these men, sensing the
>unstoppable clamor for a soak-the-rich income tax, decided to run to the
>head of the parade, lead it away from Wall Street, and render the law
>harmless to themselves and their friends. It is not paranoia, however, to
>sense that there was more to it than that. It is quite possible that they
>represented a cabal of monetary and political scientists that planned the
>entire scenario and even helped create the public clamor that would serve
>as an excuse for their action. Their objective, in this more sinister view,
>would have been the creation of a modern serfdom with themselves as lords
>and masters. The serfs would be convinced of their self-importance by the
>delusions of representative government and the socialist tax that they
>honestly believed was to their benefit. The age-old dream of contented
>serfs would at last be realized.
>
>The Senate approved the 16th Amendment by an astounding vote of 77 to zero!
>The House followed suit with a roll call of 318 to 14. The measure then
>went to the states for ratification. On February 12, 1913, the 42nd state
>voted for approval, and the following words became a part of the United
>States Constitution:
>
>The Congress shall have power to lay and collect taxes on incomes, from
>whatever source derived, without apportionment among the several States,
>and without regard to any census or enumeration.
>
>CASTING THE DIE
>The 16th Amendment was sold to the people with solemn assurance that the
>income tax would be simple to compute, fair to all, and would never apply
>to any part of a person's income needed to sustain a decent standard of
>living. It was generally understood that only very large incomes derived
>from investments would be taxed, not the wages of the working man. That
>was, of course, a farce. The very first federal tax form issued in 1913
>listed wages and salaries as income on which tax was to be paid.
>
>The first tax was delicate by today's standards. After a whopping exemption
>on the first $4,000 of family income, the government took only one percent
>of the first $20,000. two percent at $50,000. and the highest rate was
>seven percent on incomes in excess of $500,000. These were all astronomical
>incomes in 1913, so it was only the very wealthy who paid any tax at all.
>
>But the die was cast. Now that the federal government had a direct and
>perpetual access to the wealth of its citizens and no longer had to justify
>its financial needs through specific revenue acts, its spending began to
>rise like a hot-air balloon. With each round of spending came a reduction
>in the amount of exemptions, an increase in the tax rate, and a
>compounding of the complexity. At first it was the incomes of corporations;
>then of the very wealthy; then of the well-provided widow and the highly
>paid worker; and finally the wages of the janitor and the tips of
>waitresses.
>
>No one in America fully understands the constantly changing Internal
>Revenue Code. Agents of the IRS do not, judges do not, congressmen do not,
>and most assuredly taxpayers do not.
>
>When one considers the complexity of the tax code and the astronomical
>expense of operating the IRS itself, it is obvious that every other tax
>that has ever been tried in history is easier to compute and more efficient
>to collect than the income tax. And every time there is a tax "reform" bill
>rushed through Congress, the tax code always seems to emerge
>more complex and unfair than before. It is the nature of the beast.
>
>The result of this reality is aptly described in the beginning of Prentice
>Hall's booklet, Research in Federal Taxation. Under the heading,
>"Opportunities Unlimited," it says:
>
>Today's tax professionals face the prospect of the most promising future in
>the history of their profession.... With each passing year the federal tax
>laws affect American business and the individual taxpayer more and more. No
>businessperson, however expert in the business practices, can do without a
>tax advisor. He or she needs help on business transactions that have tax
>implications, because many daily business decisions are
>regulated to a degree by the tax consequences and results. And the great
>majority of taxpayers are becoming increasingly aware of the impact of the
>federal tax on their income and personal wealth. Their investments,
>provisions for retirement, wills, and business-connected (or sometimes even
>personal) expenditures require tax planning.
>
>America has become infested with a swarm of tax professionals who are a
>drain on every business and private transaction that occurs. A significant
>part of everything we purchase goes to pay for a vast workforce of
>bookkeepers and accountants who must maintain reams of records to
>substantiate every cost of doing business, while producing nothing to
>expand the physical or cultural well-being of the nation.
>
>RETARDING THE ECONOMY
>
>In the long run, any income tax, even one that is based on the same
>percentage for everyone, will serve to lessen the incentive to produce and,
>thus, will retard the nation's economic growth - which, in turn, will lower
>everyone's standard of living. One of the most powerful advocates of this
>idea in 1879 was Henry George, better known for his advocacy of a single
>tax on land. We do not have to agree with his thesis on the single tax to
>appreciate the wisdom of his opposition to a direct tax on income or
>personal property. In his treatise Progress and Poverty, George wrote:
>
>If I have worked harder and built myself a good house while you have been
>contented to live in a hovel, the taxgatherer now comes annually to make me
>pay a penalty for my energy and industry by taxing me more than you. If I
>have saved while you wasted, I am [milked] while you are exempt.
>
>If a man built a ship, we make him pay for his temerity as though he had
>done an injury to the state; if a railroad be opened, down comes the tax
>collector upon it as though it were a public nuisance.... We punish with a
>tax the man who covers barren fields with ripening grain; we fine him who
>puts up machinery and him who drains a swamp.
>
>To abolish these taxes would be to lift the whole enormous weight of
>taxation from productive industry.... The state would say to the producer,
>"Be as industrious, as thrifty, as enterprising as you choose. You shall
>have your full reward!"
>
>Since the income tax was created in 1913, it has been a long, bumpy ride
>and the American people have been jarred into a state of annoyance. We no
>longer are misty-eyed over political rhetoric that promises a utopia to be
>paid for by someone else. We have learned the hard way that there is no
>free lunch. Our "lunch," in fact, has cost us a fortune.
>
>It has been necessary to review some history and taxation theory in order
>to come to an understanding of how we got to where we are and, most
>important, to learn from the mistakes of the past. Hopefully the
>information presented here will help crystallize the thinking of those who
>are opinion leaders. But specific proposals must be constructed in
>such a way as to have broad, immediate appeal to the American public. With
>that objective in mind, let us turn, finally, to what now must be done to
>restore tax sanity to our government.
>
>Presidential candidate Steve Forbes has made his "flat-tax" plan a major
>campaign issue. A flat-rate income tax is certainly an improvement over a
>graduated income tax. But if a flat-rate tax were adopted, it still would
>be a direct tax and would still allow Congress to have continual access to
>our pocketbooks without ever having to explain or justify why it needed the
>money. Tax reform will never become a reality until Congress is once again
>required to live within a modest means -as would automatically happen if it
>had to depend only on indirect taxes - or, if extraordinary revenue is
>wanted, to specify the exact amount and to justify it in a specific revenue
>act.
>
>ELIMINATE THE INCOME TAX
>The flat-tax plan is not the answer. What we need is to follow the greatest
>proposal for tax reform the world has ever seen, and it is already in our
>Constitution. What we need is to take the chains off the rule of
>apportionment and put them back where they belong, on the
>Congress of the United States. What we need is to repeal the 16th
>Amendment.
>This single act would accomplish almost everything the current proposals
>for tax reform claim to seek. For the first time since 1913, the federal
>government would have to prepare a realistic budget, because it would no
>longer be able to rely on an ongoing, limitless supply of revenue. Like the
>rest of us, it would have to live within its means, which would be from
>indirect taxes only. If it exceeded this budget, it would have to face the
>voters with a specific request for a specific amount on a specific date. It
>is difficult to conceive of a more effective plan for trimming the scope
>and reach of the federal bureaucracy. It would be necessary to scrutinize
>the budget to try to discover the hidden boondoggles and subsidies. Cut
>back the funds, and these automatically would wither away. The rule of
>apportionment is the only realistic answer.
>
>Yes, we are talking about the elimination of the income tax. Many people
>would naturally ask, "But where would the money come from to run the
>government?" This question presupposes that all the money the federal
>government now receives is necessary. The reality is that - if we were to
>cut out the waste, subsidies, foreign giveaways, transfer programs,
>interest on the national debt, transfusions into the International
>Monetary Fund, and support for the World Bank, plus the cost of running the
>IRS itself - the federal government could easily operate, as it was
>intended to do, on indirect taxes alone. Many important sources of revenue
>would not be affected by apportionment, most specifically tariffs (for
>revenue only, not for subsidizing a politically favored industry) and such
>excises as a gasoline tax for the maintenance of roads, fees for admission
>to national parks, postage stamps for the operation of the post office, and
>similar items. It is totally workable.
>
>the end
>
>-> Send "subscribe snetnews " to majordomo@world.std.com
>-> Posted by: Emmilene@aol.com
>
>
>
>Charles L Hamilton (chasml@phoenix.net) Houston, TX
>-------------------------------------------------------------------------
> "If ye love wealth greater than liberty, the tranquility of servitude
> greater than the animating contest for freedom, go home from us in
> peace. We seek not your counsel, nor your arms. Crouch down and lick
> the hand that feeds you. May your chains set lightly upon you; and
> may posterity forget that ye were our countrymen." - Samuel Adams
>-------------------------------------------------------------------------
>
>
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Paul Andrew, Mitchell, B.A., M.S. : Counselor at Law, federal witness
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