The 1920’s saw the rise of notorious Chicago gangster Al Capone from a bouncer in a brothel, (where he coincidentally developed syphilis) to Public Enemy No. 1 after the Valentine’s Day Massacre where seven rival gang members were murdered. Capone eventually was arrested, and spent 8 years out of an 11 year sentence before being paroled. But Capone never served any time in prison for his racketeering enterprises; he was tried and convicted for….TAX EVASION.
Yes ladies and gents, as April 17 slowly draws near, it’s time for Neal’s annual rant on taxation. So buckle your seat belts and enjoy the ride…
Do you remember when the actor Wesley Snipes was arrested and tried for tax evasion? What were your sentiments when he was found guilty and sentenced to 3 years in federal prison? Were you happy that someone who had attempted to defraud the government was brought to justice? I can tell you how I felt; I felt sad because I do not support our government’s right to tax the earnings of the people of this country; no matter how legal they say that right is.
When talking about taxation there are basically two types; indirect and direct. Indirect taxes are those in which the consumer does not directly pay to the government. A perfect example of an indirect tax is the sales tax. When you purchase an item at a store, the sales clerk adds the tax to the price of the item you are purchasing, and they then pay the taxes owed to the government.
A direct tax, on the other hand, is paid directly to the government by the person who owes it. A perfect example of a direct tax is the income that is withheld from your pay to fund the operation of our government.
I don’t think most people fully realize the extent to which they are taxed; I really don’t. Do you have a cell phone? Have you ever closely examined your monthly bill? Did you fail to notice that you are taxed for using the airwaves? How about your cable bill; ever stop to look at the taxes you pay for having hundreds of channels of garbage to watch on your TV? Well all drive, right? Well when you fill your tank you are also paying taxes; and in California where I live that tax is $.41.7 cents per gallon.
Of course we’re not the only ones who are taxed; businesses and corporations are taxed as well. You don’t think they are going to shoulder the burden of paying those taxes when they can easily pass them on to consumers by raising the price of the goods they manufacture, do you?
Almost from the moment we enter this world we are bombarded with taxes; and death passes those taxes on to our posterity in the form of inheritance taxes. So we pay taxes upon the goods we acquire throughout our lives, then when we die our children are taxed simply because they obtain ownership of what had belonged to their parents.
In 1966 the Beatles released their seventh studio album Revolver. The first song on that album was written by George Harrison and is entitled Taxman. Read the lyrics, paying close attention to the last lines, and then I’ll get back with you.
Let me tell you how it will be
There’s one for you, nineteen for me
Cos I’m the taxman, yeah, I’m the taxman
Should five per cent appear too small
Be thankful I don’t take it all
Cos I’m the taxman, yeah I’m the taxman
If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold I’ll tax the heat
If you take a walk, I’ll tax your feet
Cos I’m the taxman, yeah I’m the taxman
Don’t ask me what I want it for (Aahh Mr. Wilson)
If you don’t want to pay some more (Aahh Mr. Heath)
Cos I’m the taxman, yeah, I’m the taxman
Now my advice for those who die
Declare the pennies on your eyes
Cos I’m the taxman, yeah, I’m the taxman
And you’re working for no one but me
The first time taxes are mentioned in the constitution is in Article 1, Section 2, where it states, “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective numbers…” So basically, if our government needed $1 million to fund its operations, it would take that one million and divide it according to the numbers taken during the most recent census; with the people of the more heavily populated States paying a larger share of the tax bill than those living in the less populated States.
Although there are only two primary types of taxes, there are many ways in which taxes can be collected within those categories. Article 1, Section 8 of the constitution mentions a few of them as ways by which our government can raise revenue, “The Congress shall have the Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States…”
Let’s look at those types of taxes more closely. A duty is a tax which is typically associated with customs; such as tariffs on imported goods. An impost is pretty much the same thing. However, an excise tax is something different altogether. An excise tax is a tax which is levied upon consumption, with the more you consume meaning the more you pay in taxes. If you have a gas guzzling SUV and your neighbor has a hybrid that uses less gas, you are going to end up paying more in excise taxes on gas because your vehicle consumes more gas than your neighbor’s hybrid. If there is an excise tax upon liquor and you are a non-drinker, then you won’t pay any excise taxes for that particular item; but if your neighbor drinks a fifth of whiskey a day, he will.
If you know your American History you will remember that the subject of taxation played a major role in the Colonies deciding to seek their independence from England; you know the whole taxation without representation thing. I find it hard to believe that they would fight a war to free themselves from oppressive taxes, only to replace their old system of government with one that had the authority to levy oppressive taxes of its own. That just doesn’t make any sense to me; but then again I see a lot of things happening today that defies reasoning.
I want to kind of veer off course for a moment to ask you a question. Who do you think would be the best source to turn to when trying to understand the meaning and intent of the constitution? Do you think the text books you learned from in high school are your best resource? Do you think it is whatever your elected officials believe the constitution means to them? Or could you possibly believe that the best way of learning what the constitution means is by actually reading what those who wrote and ratified it said about it?
In 1969 the Supreme Court heard the case of Powell v. McCormack. In their ruling they state, “The values of the Framers of the Constitution must be applied in any case construing the Constitution. Inferences from the text and history of the Constitution should be given great weight in discerning the original understanding and in determining the intentions of those who ratified the constitution. The precedential value of cases and commentators tends to increase, therefore, in proportion to their proximity to the adoption of the Constitution, the Bill of Rights, or any other amendments.”
To put that in simple English, the closer one gets to the ratification of the constitution, the more importance one should place upon what was said as to how it was to be interpreted, or understood.
But there’s another thing I’d like for you to give a great deal of thought to. The constitution, when presented to the States, was merely a suggestion for a system of government; it had no authority over the States or the people. They had to agree to what the constitution said before the government it outlined could go into effect.
The thing was, it wasn’t an easy sell for those who wrote the document in the first place; there were many important figures from the revolution who opposed its ratification. The arguments which took place between the Federalists, (those who supported ratification), and the Anti-Federalists, (those who opposed ratification), make for fascinating reading; at least for me it does.
But the fate of the proposed constitution was not left to a vote of the people in general; it wasn’t put on a ballot measure like things are today. Instead, the fate of whether or not we would adopt the system of government proposed by the constitution rested upon those who attended the various State Ratifying Assemblies. As it were the delegates to these Assemblies who had the final say in whether or not we would implement the government being discussed, don’t you think it is how that document was sold, or presented to them that should be used as the final say in how to interpret the constitution?
Notes from the various State Ratification Assemblies are few and far between, and even harder to find for the average person. But, the writings of the Federalists, known as the Federalist Papers, aren’t. Although the Federalist Papers were a marketing campaign designed to get people to support ratification, they also can be taken to be promises that how they explain the constitution is how it was actually to be interpreted; that is of course unless they were flat out lying; which is totally within the realm of possibility.
All that aside, in Federalist 12 Alexander Hamilton states, “It is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself, that it is impracticable to raise any very considerable sums by direct taxation. Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the States have remained empty. The popular system of administration inherent in the nature of popular government, coinciding with the real scarcity of money incident to a languid and mutilated state of trade, has hitherto defeated every experiment for extensive collections, and has at length taught the different legislatures the folly of attempting them.” (Emphasis added)
He then goes on to say, “In so opulent a nation as that of Britain, where direct taxes from superior wealth must be much more tolerable, and, from the vigor of the government, much more practicable, than in America, far the greatest part of the national revenue is derived from taxes of the indirect kind, from imposts, and from excises. Duties on imported articles form a large branch of this latter description.
In America, it is evident that we must a long time depend for the means of revenue chiefly on such duties. In most parts of it, excises must be confined within a narrow compass. The genius of the people will ill brook the inquisitive and peremptory spirit of excise laws. The pockets of the farmers, on the other hand, will reluctantly yield but scanty supplies, in the unwelcome shape of impositions on their houses and lands; and personal property is too precarious and invisible a fund to be laid hold of in any other way than by the inperceptible agency of taxes on consumption.”
Yet as soon as our constitution went into effect, and Hamilton was appointed to the position of Secretary of the Treasury, he supported an excise tax on whiskey, which led to the Whiskey Rebellion in which Washington marched federal forces into Pennsylvania to suppress.
Up until 1913 the primary source of income for our government came from tariffs and excise taxes; there was no tax upon the income of the people of the United States prior to 1913; although Abraham Lincoln did sign into law the Revenue Act of 1831 which implemented a flat tax of 3% upon anyone earning more than $800 per year.
The following year that was repealed, to be replaced by the Revenue Act of 1862 which gave us our first graduated tax scale; with 3% on incomes over $600, and 5% on incomes over $10,000. Even back then the Congress, although it consisted mostly of Northern Republicans, was clearly not concerned that it was levying a direct tax that was not apportioned; as per Article 1, Section 2 of the constitution.
But it was the year 1913 that saw us become slaves to our government via their ability to decide how much of our earnings they got to take from us to fund their operations. It was the ratification, (although there are those who claim it was never lawfully ratified by the States), that made the taxation of our income possible.
Although it took a few years, it was probably the Supreme Court’s ruling in Pollock v. Farmers’ Loan and Trust Company that probably led them to propose the 16th Amendment. In 1894 an amendment was attached to the Wilson–Gorman Tariff Act that sought to impose a 2% tax upon those earning more than $4,000 per year. The Supreme Court ruled that to be an unconstitutionally un-apportioned direct tax.
In his dissenting argument, Justice John Harlan stated, “When, therefore, this court adjudges, as it does now adjudge, that Congress cannot impose a duty or tax upon personal property, or upon income arising either from rents of real estate or from personal property, including invested personal property, bonds, stocks, and investments of all kinds, except by apportioning the sum to be so raised among the States according to population, it practically decides that, without an amendment of the Constitution – two-thirds of both Houses of Congress and three-fourths of the States concurring – such property and incomes can never be made to contribute to the support of the national government.” (Emphasis added) I don’t see what Justice Harlan’s problem was, for that is how the constitution was written, and how it was understood by those who agreed to implement it; no direct taxes without them being apportioned; and if they wanted to change that, then a constitutional amendment would be required to do so.
In any case, in 1913 they got their constitutional amendment in the form of, “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.” (16th Amendment)
Why this was adopted still boggles my mind. I can understand the reasoning, at least partially so. Many States were being excessively hurt by excises and tariffs and felt that an income tax upon the people would lessen that burden. But still were they so naive that they thought that if they stopped having to pay so much in tariffs or excises that the government would then just turn around and start collecting what it needed directly from their earnings? Maybe that just goes to show how people, even back in 1913, had forgotten how oppressive direct taxation could be.
Almost immediately after the 16th Amendment was ratified the Congress passed the Revenue Act of 1913; re-imposing an income tax while at the same time lowering the tariff rate from 40% to 25%; thereby beginning the process by which a large portion of our government’s revenue would come from direct taxes upon the people.
The validity of the Revenue Act of 1913 was decided upon by the Supreme Court in the 1916 case of Brushaber v. Union Pacific Railroad, where the court held, “…subject only to such exemptions and deductions as are hereinafter allowed, the net income of a taxable person shall include gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, businesses, trade, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in real or personal property, also from interest, rent, dividends, securities, or the transaction of any lawful business carried on for gain or profit, or gains or profits and income derived from any source whatever….”
Read that again, very carefully, to see what the court held was taxable income; it pretty much covers every way possible by which income may be derived.
The Revenue Act of 1913 laid out the first government sanctioned graduated tax brackets upon the entire country. Those earning up to $20,000 would pay a 2% tax; those earning up to $50,000 would pay 3%; with the process capping out at those earning over $500,000 at a 7% tax rate.
Compare that to today’s tax rates, with the lowest being 12% for heads of households earning up to $13,000 and the maximum being 37% for those earning more than half a million dollars per year.
Doesn’t it strike as just a bid odd that our government was in operation for 124 years without the need for an income tax? Don’t you find it even the slightest bit disturbing that, no matter how much those blood sucking leeches take from you, that they cannot seem to pay down the debt they continue to accumulate?
The constitution does not specifically require that Congress pass an annual budget, however it is the House of Representatives which controls the purse strings, so to speak. They are the ones who decide how much money our government will spend upon the various programs our government initiates.
We, as individuals, are required to live within our means; although there are those who overextend themselves and end up declaring bankruptcy. Sure, we have credit cards, but when we reach our max we can’t just call Visa and ask for them to raise the amount we are allowed to put on our credit card.
Yet that is exactly what our government does; it asks for, what is known as a raise in the debt ceiling, allowing them to borrow more money just to keep its doors open for business. Right now, as I sit here typing this, the federal deficit; the amount our government spends beyond what it takes in from taxes, stands at $716 billion; that’s BILLION! Our national debt, the debt which we are on the hook for, stands at $20.6 TRILLION!!!
If the government were to up and tell every taxpaying American that they had to cough up the money to pay off the debt, each of us would have to write Uncle Sam a check for $170,377. But still, people vote for candidates who promise to lower the tax rate, while at the same time expect government to keep on running, while adding more programs to the list of programs they don’t have money to fund in the first place.
Excuse the language, but are we fucking insane?
I could go into the fact that this was all by design, an insidious plan to reduces us from freemen to serfs working on the federal plantation; but you wouldn’t believe that even if I provided incontrovertible evidence supporting the claim. All I can hope to do is prove to you that we cannot continue along the path we’re currently on without our system eventually imploding. Our government cannot continue to borrow at the rate it is, and expect the well to not run dry some day. And you can bet your ass that they won’t stand trial or face the consequences of the mistrust we have placed in them.
No, it will be you and I who suffer most. The thing is, I am aware of this impending crisis of Biblical proportions, and you aren’t. So at least I won’t be to blame; because I tried warning you. But you, because you continue to play your silly game of two party paradigm, never stopped to wonder when the bill will come due for all the unconstitutional bullshit you expect your government to do for you.
Believe me, I’m going to derive a great deal of enjoyment rubbing your faces in it when it all comes crashing down around us.