Undoing the American Republic with Welfare and Institutionalized Poverty (That’s Why Welfare Reform is So Important!)

WELFARE - work hard, millions depend on you (BEST)

by Diane Rufino, September 30, 2018

Government programs such as welfare and other social means-tested programs characterize very well the government’s general policy towards poverty: Make individuals “comfortable” in their poverty rather than incentivize them to become self-sufficient. Those dependent on government have little incentive to vote against its interests; those dependent on government have little incentive to vote for fiscal conservatism and for constitutional conservatism.

The premise of this article is three-fold:

(1)  To make the argument that government entitlement and other social welfare policies (means-tested programs), rather than serving “the general welfare” and helping to raise people out of poverty, in fact are really just increasingly making individuals “more comfortable” in their poverty, are increasingly relieving them of the “burden” of having to provide for themselves and their families, and in their sum, are creating institutionalized dependency. We see it already, and have seen it for many years now – welfare has become a way of life and not just a temporary program of aid and assistance; even worse, it has become a generational way of life.

(2)  Dependency, and certainly institutionalized dependency, by its very nature, puts individuals completely at odds with the notion of freedom. An individual cannot be free and dependent on government at the same time.  As more become dependent on government, there is no other course than the destruction of our republic and the transformation to socialism. Socialism is the death blow to individual liberty. The rights of the individual, the property of the individual, the work and production of the individual, becomes subject to the needs and best interests of the collective. Socialism is the death blow to the great American experiment.

(3)  Entitlement Programs, like block grants to the States (per “contact agreements”), are Unconstitutional.

A GOVERNMENT OF LIMITED POWERS?

As the title of this article suggests, I intend to address the constitutionality of Welfare and other means-tested social programs. The United States was once a country that prided itself on the ambition, creativity, ingenuity, energy, and production of the American people. Americans worked hard; they provided for themselves and their families. Without the lure of a safety-net, people became creative and ambitious and did whatever they could to make a living and provide for themselves and their family. With people like that, with social pressure like that, is it any wonder that our country was so successful and created such profound wealth? Is it any wonder that people were able to climb the social ladder so quickly and children and grandchildren became more successful than their parents? Is it any wonder why the United States became such an attractive magnet for the impoverished and downtrodden of the world?

But after the era of Franklin Delano Roosevelt, the United States slowly and steadily became a welfare state, with Lyndon B. Johnson taking the most credit for what our country has become.  In 1964, with the Civil Rights bill looming, Johnson said to his political cronies: “These Negroes, they’re getting pretty uppity these days and that’s a problem for us since they’ve got something now they never had before, the political pull to back up their uppityness. Now we’ve got to do something about this, we’ve got to give them a little something, just enough to quiet them down, not enough to make a difference.”

Well, it did make quite a difference. Rather than help pull African-Americans out of poverty, welfare often doomed them to institutionalized poverty. Rather than help African-Americans overcome the prejudices, discriminations, and actions that held them back in the past, welfare was responsible for the greatest change in community dynamics which would have unfortunate consequences for them – it destroyed the black family.  The impact of welfare policies on marriage and family have been dramatic: Out-of-wedlock birthrates have skyrocketed among all demographic groups in the US but most notably among African Americans. In the mid-1960s, the out-of-wedlock birth rate was scarcely 3% for whites, 7.7% for Americans overall, and 24.5% among blacks. By 1976, those figures had risen to nearly 10% for whites, 24.7% for Americans as a whole, and 50.3% for blacks specifically. And today, the numbers stand at 29% for whites, 41% for the nation overall, and 73% for blacks. In other words, thanks to the welfare state, the entire country is moving rapidly in the wrong direction, but blacks in particular have reached a point of veritable catastrophe.

Is welfare constitutional??   I’ll eventually get to that question.

First of all, where does the supposed constitutional authority come from to redistribute wealth in the name of “welfare” or “security”?  The usual answer is the “General Welfare” clause of the Constitution. In the opening paragraph of Article I, Section 8 (which delegates to Congress the powers it is legally authorized to exercise), we find the “General Welfare” Clause. We have seen that term previously, of course – in the Preamble to the Constitution. In that opening paragraph of Article I, Section 8, Congress is granted power to tax and spend for the “general welfare of the United States.” From early in our history there were arguments about what sort of spending was truly for the general welfare. Treasury Secretary Alexander Hamilton, for instance, argued in 1791 that bounties paid to innovative new manufacturing concerns would qualify as spending for the general welfare. But Hamilton understood that the appropriations had to meet a standard of  uniformity throughout the Union. And for decades, Congress and various presidential administrations (mostly Republican) considered whether various “internal improvement” projects could legally constitute spending “for the general welfare.”

The government is not one of unlimited powers. We all know this. The US Constitution, as ratified by the individual states, created a common government of expressly-delegated powers which taken together, provide for some common essential functions (like safety and security, speaking with “one voice” in dealing with foreign nations and the Indian tribes, ensuring that commerce is made “regular,” and providing a uniform system of currency). Its powers were not intended to reach inside the state to regulate or affect the conduct of its citizens.

And yet the Constitution contains a clause that references “the General Welfare.” It’s called the “General Welfare Clause” and its purpose means one thing to big government folks and another to those who hold true to the historical view of the Constitution.

This clause is a special friend of  big-government politicians and intellectuals, and an enemy of limited-government folks. It is the catch-all phrase by which the federal government claims the authority to enact so much of its unconstitutional legislation and to carry out so much unconstitutional taxing and spending.

When the federal government wishes to create and expand welfare programs, to meddle in education, to provide grants for certain groups of individuals to attend college, to assist women in aborting their babies, to establish a national healthcare system, to serve the enormous immigration population (including illegals), to provide financial support for refugees, or to coerce the states to increase their drinking age or lower their speed limit,  progressives cite the “General Welfare” clause for constitutional authority.

Constitutional conservatives, on the other hand, push back with the argument that the General Welfare Clause is NOT, in fact a grant of power or source of authority.

Which is the correct view?  And why is it so important?

THE GENERAL WELFARE CLAUSE:

Article I, Section 8 of the Constitution lists the delegated functions of the federal legislative branch (Congress): Its opening paragraph includes the General Welfare Clause:

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;

To borrow Money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several states, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;  —And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

[This last provision is called the “Necessary & Proper” Clause; it is typical language included in contracts at the time making clear that the party delegated a particular function or functions can take the “necessary” steps to carry out that function or those functions.]

FEDERAL SPENDING:  IS IT ALL CONSTITUTIONAL? 

The federal government spends money, through grants, tuition, other types of “assistance,” etc, to do things it cannot otherwise accomplish through actual constitutional authority. For example, the federal government provides funding to States to build roads, bridges, train tracks, airports, electric grids, libraries, swimming pools, housing, and other infrastructure; it provides funding to educate our children and to require public schools to implement affirmative action and other special programs for minorities and for students with disabilities; it provides funding for pre-school and day care; it provides funding to re-train the unemployed; it provides funding for relief aid; it provides funding for state and local law enforcement; it provides funding for Medicaid, food stamps, free lunch programs, and other social services; it provides funding to aid illegals; and it provides funding to individuals for college tuition, tuition remission, as scholarship awards, for housing, etc.

Article 1, Section 8, Clause 1 grants the US government the power to raise and spend money. Is that power limited?  Or is it unqualified and unlimited?  We all know the government’s view.

The government may believe it is justified under the General Welfare Clause, for example, to provide healthcare for the elderly (or for everyone), to provide old-age pension, to fund public health projects; to invest in and conduct basic research; to provide subsidies for agriculture; to build libraries, and even to provide emergency aid for natural disasters. But under what theory of a “limited government” is Congress justified in taxing and spending for such purposes as building roads, bridges, train tracks, airports, electric grids, libraries, swimming pools, and housing, educating our children, providing pre-school and day care; re-training the unemployed, and bailing out big banks and big industry (such as the auto industry)?  The answer is that according to the delegated powers vested in Congress in Article I, Section 8, none of those responsibilities is allowed. “The powers not delegated to the States, nor prohibited to them, are reserved to the States and to the People.”  Then Tenth Amendment tells us that all of these objects rightfully belong to the States. While the government assumes the authority to tax and spend for these objects from the General Welfare Clause, it is the Tenth Amendment that supersedes.

The amount spent on such programs is staggering:

First of all, the US Treasury divides all federal spending into three groups: mandatory spending, discretionary spending and interest on debt. Mandatory and discretionary spending account for more than ninety percent of all federal spending, and pay for all of the government services and programs on which many rely. Federal spending for 2015 was broken down as follows: Mandatory spending at 64.4%, Discretionary spending at 29.3%, and Interest on the debt at 6.03%.

Discretionary spending refers to the portion of the budget that is decided by Congress through the annual appropriations process each year. These spending levels are set each year by Congress. In fiscal year 2015, $1.1 trillion out of a total budget of $3.8 trillion was spent on discretionary spending. By far, the biggest category of discretionary spending is spending on the Pentagon and related military programs. Examples of other well-known programs paid for by discretionary spending include the early childhood education program Head Start (included in Housing & Community), Title I grants to disadvantaged schools and Pell grants for low-income college students (Education), other school funding, food assistance for Women, Infants and Children (WIC), training and placement for unemployed people provided by Workforce Investment Boards (in Social Security, Unemployment and Labor), and scientific research through the National Institutes of Health (NIH) and National Science Foundation (NSF), among many others.

Mandatory spending is spending that Congress legislates outside of the annual appropriations process, usually less than once a year. Out of a total budget of $3.8 trillion, $2.45 trillion was spend on mandatory spending. It is dominated by the well-known “earned-benefit” programs Social Security and Medicare (that is, people have money taken out of their wages for these programs). It also includes widely used safety net programs like the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), and a significant amount of federal spending on transportation, among other things.

Many mandatory programs’ spending levels are determined by eligibility rules. For example, Congress decides to create a program like Social Security. It then sets criteria for determining who is eligible to receive benefits from the program, and benefit levels for people who are eligible. The amount of money spent on Social Security each year is then determined by how many people are eligible and apply for benefits, whether or not they have paid into the program. [Note: Congress does not decide each year to increase or decrease the budget for Social Security or other earned benefit programs. Instead, it periodically reviews the eligibility rules and may change them in order to exclude or include more people, or offer more or less generous benefits to those who are eligible, and therefore change the amount spent on the program].

Mandatory spending makes up nearly two-thirds of the total federal budget. Social Security alone comprises more than 1/3 of mandatory spending and around 23% of the total federal budget. Medicare makes up an additional 23% of mandatory spending and 15% of the total federal budget. [See:  https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/ ]

The question is: Are these grants and other forms of assistance to the States constitutional?  Perhaps such programs as Social Security and Medicare are constitutional, or at least at one time were (that is, when salary deductions for them were still considered a property right), but now they are simply considered another federal tax.

But what about the other programs??   Welfare (for the poor and the generational dependents), education funding, funding for transportation, state grants?

On the government’s website (https://www.grants.gov/learn-grants/grant-policies.html; “A Short History of Federal Grant Policy”), there is this explanation:

      Billions of dollars in Federal grants are awarded each year for programs and projects that benefit the public. This assistance is rooted in the Constitution and its call to “promote the general Welfare.”

      It wasn’t until the 1970’s, however, that Federal grant policy began to evolve into what it is today. The Federal Grant and Cooperative Agreement Act, passed in 1977, set out to guide government agencies in their use of Federal funds – particularly by defining the roles of contracts, cooperative agreements, and grants. Contracts, the law states, should be awarded when a Federal agency is acquiring something – an improved computer network, for example. Grants and cooperative agreements, meanwhile, should be awarded when a Federal agency is providing assistance, such as funding for a lower-income housing program in an at-risk urban community.

The federal government, by law, has established a grant program (mandatory grants and discretionary grants) whereby it provides funding to the states as a means to further its policies or to coerce conformity among the states on matters it has no actual constitutional authority to legislate. These grants are contractual in nature and so, legally, if the particular state accepts the money, it agrees to the conditions attached to it. It’s a matter of free will. And so the government achieves contractually, and coercively (because money is an attractive carrot) what it cannot achieve constitutionally. It is the means by which the federal government can control and coerce the States; it is the means by which the federal government can achieve an end-run around the Constitution and accomplish unconstitutionally what the Constitution legally does not allow it to accomplish. Federal grants to the states (grants-in-aid) are a primary mechanism that the federal government uses to extend its influence into state and local affairs.

The matter of federal funding and the coercion associated with it was addressed in 1987 with the Supreme Court case South Dakota v. Dole. The case centered on the constitutionality of the National Minimum Drinking Age Act, which was passed in 1984.  Specifically the Supreme court was asked to consider the limitations that the Constitution places on the authority of the US Congress when it uses its authority to influence the individual states in areas of authority normally reserved to the states.

The National Minimum Drinking Age Act (NMDAA) withheld 10% of federal highway funding from states that did not maintain a minimum legal drinking age of 21. South Dakota, which allowed 19-year-olds to purchase beer, challenged the law as an abuse of power, naming Secretary of Transportation Elizabeth Dole as the defendant.

The Court, in a 7-2 opinion, upheld the statute’s constitutionality. The majority opinion, written by Chief Justice William Rehnquist, articulated a 5-point rule for considering the constitutionality of expenditure cuts of the type in the NMDAA:

  • The spending must promote “the general welfare.”
  • The condition must be unambiguous.
  • The condition should relate “to the federal interest in particular national projects or programs.”
  • The condition imposed on the states must not, in itself, be unconstitutional.
  • The condition must not be coercive.

Rehnquist concluded that the NMDAA met the first three restrictions and thus was a constitutional exercise of Congressional authority. Furthermore, he wrote that Congress did not violate the Tenth Amendment because it merely exercised its right to control its spending nor did the statute coerce the states since it cut only a small percentage of federal funding.  According to Rehnquist, Congress applied pressure, but not irresistible pressure.

I believe the opinion was a poor exercise of judicial interpretation, and it hurts me to say that considering what a fan I usually am of William Rehnquist.

While contacts are always allowable, the question I ask is whether it is constitutional in the first place for the federal government to collect tax money for the purpose of doing something unconstitutional (even if it is by contract). I think it is an unconstitutional object of the taxing power. The power to coerce through funding is the power to coerce period.

If the federal government can use public funding to extend its authority, why can’t a state government have its citizens withhold federal tax dollars and direct it to itself instead in order to further its state authority under the Tenth Amendment?

Federal grants, put simply, are not only an unconstitutional exercise of the federal taxing and spending power but act to distort and erode the critical balance of government power between the states and the federal government.

SEPARATE GRANT OF POWER OR QUALIFYING PHRASE?

The words “General Welfare” actually create something of a dilemma. Either the founders didn’t really intend to create a general government of limited powers, or the General Welfare clause doesn’t really mean unlimited federal authority to do things beneficial to the nation as a whole.  What is it?

The answer, of course is easy. It’s just not the convenient answer for the federal government.

The grant of power to “provide . . . for the general welfare” raises a two–fold question:  (1) How may Congress provide for “the general welfare,” and (2) What is “the general welfare” that it is authorized to promote?

The first half of this question was answered by Thomas Jefferson in his opinion (to President George Washington and the First US Congress) on the government’s authority to establish a National Bank as follows: “The laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They [Congress] are not to lay taxes ad libitum for any purpose they please; but only to pay the debts or provide for the welfare of the Union. In like manner, they are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose.” The clause, in short, is not an independent grant of power, but a qualification of the taxing power. Although a broader view has been occasionally asserted, and although Congress has acted under that assumption, the Supreme Court has NOT upheld that view.

Let’s start by looking at construction:

The “General Welfare” clause, as one can notice and read, is set off by commas after the delegation of taxing power, for the purpose of clarifying WHAT the taxes collected are to be spent on. The powers enumerated in the following lines go into more specifics as to what Section 8 means when it says “to provide for the common Defense and general Welfare of the United States.” The fact that the framers followed up the general welfare clause in Article I Sec. 8 with specific enumerated powers indicates the latter – a qualification on federal authority. If they had intended Congress should have the power to do virtually anything and everything to promote the general welfare, they wouldn’t have bothered to include specific powers.

We don’t need to speculate on what the “General Welfare” clause means and we shouldn’t have to take the word of a politically-appointed Supreme Court justice. We only need to look at the explanation provided by the author of the Constitution himself, James Madison.

In a letter to James Robertson, dated April, 20, 1831, Madison makes quite clear that the phrase “for the General Welfare” is not a separate grant of power:

“With respect to the two words “general welfare,” I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators.”

The General Welfare Clause is not an enlargement clause, authorizing the government to tax and spend to pay the nation’s debts, to provide for the common defense, and to do anything it wants for the general welfare. It is a clarifying clause, serving once again as a reminder the goals of the government. The goals, of course, are stated in the Preamble to the Constitution:  “To form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity….”

Again, if our Founding Fathers and drafters of the Constitution had intended Congress should have the power to do virtually anything and everything it wanted in order to promote the general welfare, they wouldn’t have bothered to include specific delegations of power. If the government was intended to be one of unlimited and consolidated powers, what state would have ratified it?  The truth is that the Constitution was sold to the States, through written and oral assurances, as one creating a common government of limited powers to serve the States and to carry out their common functions.

James Madison, as I hope everyone knows, was a primary author of The Federalist Essays, which became known as The Federalist Papers. Knowing that of the 55 delegates who attended the Constitutional Convention in Philadelphia, only 39 signed it at the end (September 17).  Some didn’t sign because they had already left explained the convention and several didn’t sign because they could not lend it their support.  He also knew that some heavy hitters refused to even attend the convention because of grave suspicions of what the convention might try to do and that they would not support his Constitution in the state ratifying conventions. And in fact, during the ratification debates, Anti-Federalists who opposed the Constitution voiced fears that people would come along and assert that the term “General Welfare” granted unlimited power to the federal government.

Madison, together with Alexander Hamilton and John Jay, wrote the Federalist essays (ie, the Federalist Papers) as a means to explain each provision of the Constitution and for the purpose of providing assurances to the States as they contemplated whether to adopt it or not. In particular, the Federalist essays addressed the fears, the skepticism, the concerns of the Anti-Federalists (who had written a series of essays highlighting the defects in the new Constitution). The Federalist Papers, coming from the primary author of the Constitution, the man who called for the Convention, the man who provided the rough draft (rough outline) of the proposed new government), the man who attended each day, the man who took faithful notes of the proceedings and debates, the man who was almost universally perceived as being honest and trustworthy, and the man who most had a stake in seeing the Constitution through to its adoption (since it was his vision to scrap the Articles of Confederation) in favor of a new government), are without a doubt the most important and the primary authority on the meaning and intent of the US Constitution.

With that in mind, Madison addressed the scope of the General Welfare Clause in his Essay No. 41:

      For what purpose could the enumeration of particular powers be inserted, if these and all others were meant to be included in the preceding general power?  Nothing is more natural nor common than first to use a general phrase, and then to explain and qualify it by a recital of particulars. But the idea of an enumeration of particulars which neither explain nor qualify the general meaning, and can have no other effect than to confound and mislead, is an absurdity, which, as we are reduced to the dilemma of charging either on the authors of the objection or on the authors of the Constitution, we must take the liberty of supposing, had not its origin with the latter.

He went on, in Essay No. 41:

      In a more remote stage, the imports may consist in a considerable part of raw materials, which will be wrought into articles for exportation, and will, therefore, require rather the encouragement of bounties, than to be loaded with discouraging duties. A system of government, meant for duration, ought to contemplate these revolutions, and be able to accommodate itself to them. Some, who have not denied the necessity of the power of taxation, have grounded a very fierce attack against the Constitution, on the language in which it is defined. It has been urged and echoed, that the 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,’ amounts to an unlimited commission to exercise every power which may be alleged to be necessary for the common defense or general welfare. No stronger proof could be given of the distress under which these writers labor for objections, than their stooping to such a misconstruction. Had no other enumeration or definition of the powers of the Congress been found in the Constitution, than the general expressions just cited, the authors of the objection might have had some color for it; though it would have been difficult to find a reason for so awkward a form of describing an authority to legislate in all possible cases. A power to destroy the freedom of the press, the trial by jury, or even to regulate the course of descents, or the forms of conveyances, must be very singularly expressed by the terms ‘to raise money for the general welfare.’

Again, the Federalist Papers, because of how wrote the essays and for the purpose they were written, are the primary authority on the meaning and intent of the US Constitution.

Madison further illuminated the intended meaning of the General Welfare Clause in a letter written to Edmund Pendleton in 1793, pointing out that the phrase was lifted from the Articles of Confederation and was intended to retain its meaning in the new Constitution.

       “If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the Government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions. It is to be remarked that the phrase out of which this doctrine is elaborated, is copied from the old articles of Confederation, where it was always understood as nothing more than a general caption to the specified powers, and it is a fact that it was preferred in the new instrument for that very reason as less liable than any other to misconstruction.”

According to Madison, “the most important and fundamental question” with respect to the intent and meaning of the Constitution and the design of the government created was the meaning of and the relationship between the General Welfare Clause and the enumeration of particular powers in Article I, Sect. 8. This question, as he explained in Federalist No. 41, is the most “fundamental” because the answer determines the very “idea” or “nature” of the U.S. Constitution. It determines the ambition of the federal government.  Legal scholars and commentators virtually agree that the clause was not a separate grant of power but rather a substantive grant of power for the generally-stated end (see the Preamble to the Constitution). They agree that the primary purpose of the ensuing enumeration was to define more particularly the ends alluded to by the phrase “General Welfare.” Hence, the meaning of the general constitutional government in the American federal system is a government oriented to a limited number of limited ends.

I would argue then, that any “taxing and spending” for purposes not permitted under the enumerated powers, and in fact, reserved to the States per the Tenth Amendment, is impermissible and unconstitutional.

But we all know that the States are weak and the Supreme Court, because of its general aversion to cling to a meaning associated with an era long gone, intentionally ignores what our Founders have said and what they have written. They prefer to engage in their progressive way of interpreting the document in order to update it – which is merely a way of saying that they want to ignore the intended restraints on the federal government in order to transfer more and more power to it.

So the words “general welfare” must mean something other than a grant of power for Congress to do whatever it pleased. What exactly did the framers mean?

Two words in the clause hold the key – the words general and common. The phrase simply means that any tax collected must be collected to the benefit of the United States as a whole, not for partial or sectional (i.e. special) interests. The federal government may promote the general welfare, or common good, but it must do so within the scope of the powers delegated and without favoritism.

Let’s look at what the Supreme Court has said:

The Constitution contains two references to “the General Welfare” — one occurring in the Preamble and the other in the Taxing and Spending Clause. The Supreme Court, in the case Jacobson v. Massachusetts (1905), has held the mention of the clause in the Preamble to the U.S. Constitution “has never been regarded as the source of any substantive power conferred on the Government of the United States or on any of its Departments.”  Furthermore, the Court has held that the understanding of the General Welfare Clause contained in the Taxing and Spending Clause adheres to the construction given it by Associate Justice Joseph Story in his 1833 Commentaries on the Constitution of the United States:

“A power to lay taxes for any purposes whatsoever is a general power; a power to lay taxes for certain specified purposes is a limited power. A power to lay taxes for the common defense and general welfare of the United States is not in common sense a general power. It is limited to those objects. It cannot constitutionally transcend them.”    [Commentaries on the Constitution of the United States, in §919]

Justice Story concluded that the General Welfare Clause is not a grant of general legislative power, but a qualification on the taxing power which includes within it a federal power to spend federal revenues on matters of general interest to the federal government.

The problem with Justice Story’s comment (above) is that the “General Welfare” does NOT mean “General Interest to the federal government.” It means the “general welfare of the American people.” The clause means that the US Congress the power to spend for matters affecting only the national welfare, and not certain groups particularly.

The problem is that the federal government is addicted to taxing; it gives government the ability to carry out its expressly-delegated function and also the ability to carry out functions it has no authority to regulate. The latter it accomplishes by bribery – I mean, it offers the states grant money (in exchange for complying with conditions; conditioned spending).

When challenged on the federal government’s constitutional authority to create welfare programs, meddle in educations, take over public education, offer programs specifically for illegal aliens and Hispanic green-card holders, or run a national healthcare system, progressives will almost always appeal to the “General Welfare Clause.” Because they believe the government SHOULD be handling such tasks, they advance the “all-inclusive” and “all-authoritative” view of the Clause. And who is really willing to challenge this – the greater than 50% of the people who depend on government programs enacted “for the so-called General Welfare”?  At some point, there will be so very many people unable to support themselves and provide the substance to take care of themselves and their families and who look to the government that the federal courts are going to have to officially re-interpret the General Welfare Clause to give Congress a blank check to legislate for any reason related to the “general” welfare or to the welfare of any particular group of people. And perhaps that is the reason the government has, over the years, established so many policies designed to get Americans dependent on it for their essentials. Perhaps that is why Democrats in particular, continue to make sure that those on entitlement and other social programs are increasingly more “comfortable” in their poverty rather than pressured to abandon a life of dependency for one of employment and production.

WELFARE: CONSTITUTIONAL or NOT?  HOW BETTER TO PROVIDE A SAFETY-NET?

As explained above, I believe any taxiing and spending for objects NOT expressly tasked to the federal government by Article I, Sect. 8, is unconstitutional. There is no provision in the Constitution for (1) Discretionary Spending; (2) Grants and Other Types Assistance, which includes things like grants and scholarships for education, grants to the States (for roads, bridges, airports, ports, railroad tracks, public schools, Medicaid and other dependency programs, healthcare, etc); (3) Education; (4) Universal Healthcare; or (5) Welfare and other government-sponsored public assistance programs. All of these types of spending (although one might argue that for the most part, some are duplicated) allow the government to do the following:

(1)  Maintain a high federal taxation rate

(2)  Accomplish what the Constitution itself does not allow it to do.  (They permit the government to make an end-run around the Constitution)

(3)  Control people. A person dependent on government will never vote against its interests.

(4)  Exercise control over the States  (Most States can’t fund all that the State requires internally and for its people through the money that it raises by state taxation, and that is why they almost reflexively and automatically put their hands out when the federal government offers government assistance)

(5)  Apply coercion to the States.  (Again, most States can’t fund all that the State requires internally and for its people through the money that it raises by state taxation, and that is why they almost reflexively and automatically put their hands out when the federal government offers government assistance, even though they know that the funds come with strings and often times, it deprives the State of the decisions and options it could have exercised on its own)

(6)  Establish uniformity among the States (slowly erasing the borders that distinguish one state and its “politics” from another).  Dangling funds in front of a State that is otherwise strapped for funds is coercive pressure (regardless of what judges who sit on a bench in DC say) and usually results in the States accepting the money, agreeing to its conditions, and sacrificing little by little its state autonomy and sovereignty.

In other words, the spending identified above, including funding (grants) to the States and including welfare and other means-tested assistance programs, are unconstitutional.

Healthcare is a social program, plain and simple; it is socialist at its core. Those who the government determines are able to pay their insurance premiums must do so, and in fact, will be burdened with an increase in premiums. Why?  Because they are paying not only to cover themselves and their families, but to help cover all those in poverty who can’t afford healthcare on their own. It is a government program based on simple re-distribution of wealth and socialism. One group of individuals suffers a burden while another group receives a hand-out. Both pretty much get the same level of healthcare coverage.

Government, or universal, healthcare is not legitimately covered by the “General Welfare” Clause because the program doesn’t apply equally to everyone. It is a program whereby the government commandeers half the American population to cover (pay) the healthcare insurance premium costs of the other half. One half benefits in every sense of the word while the other half is forced to incur an additional burden.

Welfare, and other means-tested social programs, are other programs based on re-distribution of wealth. Those who work and make enough are required to pay federal income taxes. They work at least 3 months out of the year to pay the government what it requires, which is essentially 30% of their income and a lot more for other types of assets. Those who don’t work or only work a little (and don’t make enough) can go on welfare and can take advantage of other means-tested social programs. They can sit around and wait for their government checks – money that flows directly from those who earn and produce to those who don’t.

These programs are not legitimately covered by the “General Welfare” Clause because frankly, it doesn’t fit the definition of “general welfare.” The opening paragraph of Article I, Sect. 8 means that any tax collected must be collected in order that the government (Congress) can fund all the projects pertaining to the express powers granted to it (ie, the enumerated powers), which collectively are covered by the phrase “for the common defense and to provide for the general welfare.” Welfare and other means-tested social programs do NOT benefit the citizens of the United States as a whole, but rather benefit only a subset of the people. In fact, a good portion of citizens are harmed in order to benefit the others. That hardly seems fair. The Constitution doesn’t empower the US Congress to institutionalize giving and compassion. It only empowers Congress to act in those areas that the States originally agreed to in 1788. [On June 21, 1788 the Constitution became the official governing document of the United States of America when New Hampshire became the ninth of thirteen states to ratify it, per Article VII].

The grants to the States are simply unconstitutional because the federal government, in Article I, Sect. 8, was not delegated the authority to address any of the purposes for which the grants are offered. If the government can simply accomplish through funds (conditional funding) what it can’t accomplish according to the Constitution, then the government is not a limited one but one easily and most likely capable of becoming overly ambitious and controlling. If the government can simply accomplish through funds (conditional funding) what it can’t accomplish according to the Constitution, then our government is not longer “federal” but “national.” And we see that is absolutely true today.

Let’s go back to Welfare (and other means-tested social programs) and look at the inherent unfairness in the program. One group of people exists on welfare and other social programs; their needs and essentials are provided by the government. Since they earn no money, they pay no federal taxes. The other group is self-sufficient and is able to provide for themselves and their families (the way it was supposed to be), and because they are considered “successful,” the government demands that they pay a fairly substantial federal income tax. In fact, all their income, all their property, and all their assets must be diligently disclosed to the IRS.  Government, of course, doesn’t provide its own money but rather must obtain it, usually through taxpayer funding. So, the first group, on welfare, is not supported by the government but rather by hard-working tax-paying citizens.  One groups pays (heavily) and the other sits back and receives; yet both enjoy the freedoms, the civil rights, and the privileges, as well as the safety and security provided by the United States. But, truth be told, both exist differently and both are not served equally from the government. Here are some differences:

(a) Those on welfare don’t need to work; they don’t even need to get out of bed or get off the couch. They can socialize or they can spend all day with their kids.  Those not on welfare must work and must always be concerned that their jobs are secure.

(b)  Those on welfare don’t have to worry where their money comes from and don’t have to live check to check for their rent and their grocery bills. They get a check from the government which they can count on. Those not on welfare often live check to check; in fact, they sometimes have to take on a second job or have their spouse go to work to cover bills.  (The ironic thing is that those on welfare often tell Health & Human Services Office that there are no jobs, yet those not on welfare often have no problem finding a second job)

(c)  Those on welfare get a break in college tuition; there are lots of scholarship and tuition assistance aid to help them; those not on welfare pay more for their children to go to college.

(d)  Those on welfare get free healthcare.  Those not on welfare have to pay for their own health insurance or make sure they get a job that provides it.

(e)  Those on welfare (or those who meet other means-tested criteria) can also get food stamps (to help them buy more nutritious food), assistance for daycare (even though they don’t work), housing assistance, assistance to help cover heat and air-conditioning, etc etc.  In other words, over the years, more and more social programs have been created to help make people more comfortable in their poverty. They do NOTHING to help them become independent and self-sufficient, and in fact, do everything to establish the hand-outs as a way of life.

(f)  Those on welfare can have all the kids they want, including with as many different men as they want. Sure, they are supposed to disclose the name and contact information of the father of each child to Health & Human Services, but knowing people who have worked with HHS, women aren’t always forthcoming with such information. My mother, who worked for years with the New Hanover County Department of Health & Human Services, used to tell me how frustrating it was to work there and what a scam Welfare is. She told me how mostly black women would come in to the office with two and three and four kids and want their check. She would ask them for the name of the father of the children, and the response would be “I don’t know” or “Just give me my damn check.” She would call for her supervisor and eventually, every single time, they would get their check without giving any information.  Those not on welfare have to make a cost-benefit analysis when planning their families. Having children isn’t a scam to them or a money-making scheme. Their concerns are always whether they can afford them and provide a good life for them.

(g)  Those on welfare are supposed to continually look for work and report their efforts to HHS, but we know that’s a joke. Most know exactly how to game the system. When those not on welfare need to find a new job, they make an honest and great effort to do so.

(h)  Those on welfare can do drugs and abuse alcohol whenever they want and still collect their checks. Those not on welfare must always conduct themselves in a manner to be good and responsible employees; they must show up for work on time, be alert, be productive, not call out excessively, and must be able to pass an on-the-spot drug test.

(i)  Those on welfare never have to worry about keeping a record of their expenses, keeping receipts, or hiring an accountant to navigate the federal income tax form. They never have to worry about being audited by the IRS or will never know the absolute fear of getting a certified letter from them.  They will never have to worry about having the IRS telling them that they should have paid more in taxes and so, the money they planned to use for a vacation must be turned over immediately. Those not on welfare are slaves to the IRS and to the April 15 deadline to file their taxes.

(j)  Those on welfare never have to worry about saying or doing anything on social media or in their private lives that might somehow prevent them from receiving their checks. Those not on welfare, however, must forever be diligent in what they say, how they say it, where they say it, to who they say it, and they must be careful to give the appearance of being neutral on religion and politics and social issues should a co-worker somehow find out or should Human Resources find out. Personal opinions and politics, and activism and association…  these once traditional exercises of the First Amendment now can be reason to be fired from a job or to be denied an interview.

(l)  Those on welfare automatically get an increase in their living expenses with each additional child. Those not on welfare do not. Those not on welfare (ie, those who have honest employment) cannot game the system and defraud their employer.

(m)  Those on welfare can exploit various ways to exploit the entitlement system, including colluding with men to have additional children and splitting the welfare funds.

Welfare and other government hand-out programs offer only one positive benefit: They offer a safety net to those who temporarily are unable to work and provide for themselves and their family. This safety net was intended to be temporary, to provide for the individual while he or she figures out a way to get back on his/her feet and back into the workforce. It was NOT intended to be a way of life. It was NOT intended to be a viable alternative to a career or being a productive member of society. On the other hand, welfare and other government hand-out programs offer many negative effects (many perhaps are unintended consequences), including the following:

  • They generate and reward sloth
  • They relieve too many young people of the energy they would need to invest in an education or to learn a skill
  • They result in a lack of ambition
  • They result in an obese population (as someone from New Dehli once explained to his family: “I want to live in America. I want to live in a country where the poor people are obese.” Dinesh D’Souza tells this story)
  • They have resulted in, and continue to result in, the destruction of the family unit (welfare contains marriage penalties)
  • They have increased, and continue to increase, the level of poverty in our country [Families with an absent father, black and white alike, generally occupy the bottom rung of America’s economic ladder. Regardless of race or ethnicity, the poverty rate for single parents with children is several times higher than the corresponding rate for married couples with children. According to Robert Rector, with the Heritage Foundation, “the absence of marriage increases the frequency of child poverty 700 percent” and thus constitutes the single most reliable predictor of a self-perpetuating underclass. Articulating a similar theme many years ago, Martin Luther King, Jr. said, “Nothing is so much needed as a secure family life for a people to pull themselves out of poverty”]
  • They inspire and encourage too many people to stay on welfare and not look for employment (cost-benefit analysis)
  • They perpetuate of ignorance, illiteracy, etc
  • They serve as a viable alternative to getting an education
  • They reward those who did not take public education seriously nor took any initiative to learn a skill
  • They reward women for having children without being married
  • They reward women for not cooperating with authorities to identify the father or fathers of their children (in order to have them provide child care)
  • They have created generational government dependency (young girls imprint on their mothers and get pregnant without being married in order to be taken care of rather than get educated and work)
  • Rather than serve the positive goal of providing a temporary safety-net until the applicant can get back on his or her feet, they have become a permanent means of support. Dependency has become a way of life. (Over the years, more and more social programs have been created to help make people more comfortable in their poverty. They do NOTHING to help them become independent and self-sufficient, and in fact, do everything to establish the hand-outs as a way of life)
  • They have resulted in the increase in crime, drug use, and human decay [In agreeing to sign the Civil Rights legislation of 1965, LBJ’s chief objective was to reduce dependency by blacks and put an end to the disproportionately high rate of black poverty. He said he wanted “to break the cycle of poverty” and make “taxpayers out of tax eaters.” He further claimed that his programs would bring to an end the “conditions that breed despair and violence,” those being “ignorance, discrimination, slums, poverty, disease, not enough jobs”]
  • They have ruined whole communities
  • They have created a class system in the US (those who are dependent and are takers; and those who are independent and produce).
  • They have caused one group of citizens to distrust and to have no respect for another group of people (because many recipients are non-citizens)
  • They have caused people to question the legitimacy of the voting system [Is it fair for people living off the government (ie, other people), to have the ability to vote and have a say in how other people’s money is spent? Maybe there should be a progressive voting system like there is a progressive income tax…. Those with more money and assets are taxed at a higher level so maybe their votes should carry greater weight]

To highlight the differences between those on welfare and other social programs with those who provide for themselves one sentence, I would sum it up this way: Those on welfare receive a check without any conditions attached; those not on welfare are subject to.

The federal government has been financing government-provided welfare since the 1930s. Of the more than $1.1 trillion spent in fiscal year 2016, federal expenditures accounted for $829 billion (or 74% of all funding related to welfare programs), and state expenditures accounted for $297 billion (or 26%). Most state spending ($213 billion) is done on one single program – Medicaid. In terms of GDP, welfare alone accounts for 6%. It has risen steadily and quickly in the years after Ronald Reagan left office. During LBJ’s term, welfare spending accounted for 1.5% of GDP; during Carter’s term it more than doubled – to 3.6%; during Reagan’s term, it remained the same and even dipped; but then after he left office, it began to increase quickly and steadily.

Imagine how much each taxpayer could be relieved in his or her federal taxation burden if the federal government taxed only for the spending for which it is constitutionally allowed.  Imagine how much each individual State could then tax its citizens. They would be able to raise money on their own to cover internal expenses – the running of the State and the care of its people – and more importantly, they could spend that money AS THEY SEE FIT, and not within the conditions imposed by the federal government. Imagine how, if this financial dependency were ended, the rightful balance between federal and state government power could be better achieved.  Taking away the financial power to coerce and control leaves the States in a better position to stand up to the federal government rather than to cower and concede.

As mentioned above, the spending identified above, including funding (grants) to the States and including welfare and other means-tested assistance programs, are unconstitutional.  Yet there are citizens who feel passionate and strongly that those who can give up some of their income should do so in order to take care of those who are less fortunate, those who are legitimately disabled (and not like some friends I know who filed for disability because of their obesity), those who work but can’t provide enough for their family (while still continuing to have more and more kids), those who are here illegally and need help providing for their growing families, those who have children without being or getting married (including those who refuse to provide information to the authorities for child-support), those who are crafty at defrauding the system, those who ignored the opportunity to become educated and hence can’t get anything other than a minimum-wage job, and those who simply don’t want to work.  I wonder if they feel so passionate and so supportive of these people because they know that it is other people’s hard-earned money that will be used to support them. I wonder if they would feel the same if the money was taken from them, their family, their food allowance, and their recreation fund.  I think the only legal way that the federal government can offer welfare and other means-tested assistance programs is if it asks each taxpayer, at the time they file their taxes, if they would be willing to donate additional of their money for the care of the poor. I’m sure many would agree to do so. I’m also sure that such programs would have much less funding which means criteria would be stricter and time restraints would have to be added. The programs would clearly have to be temporary in nature and because of stringent criteria, there would be indirect pressure to get off as soon as possible.

So, let me list out some solutions to the problem of federal discretionary spending, including Welfare and state grants:

(i)  My first solution to this out-of-control, unconstitutional-taxing and spending bloated government is for the States to challenge each item of federal spending for constitutionality. For each item that is not constitutional, the federal income tax rate should be reduced accordingly.

(ii)  My second solution (and this one is for Welfare only) would be the one outlined in the previous full paragraph (each taxpayer can offer to send additional of their money to the government for welfare programs). Personally, I like this one.  This forces people to put up or shut up. It forces people to put their money where their mouth is.

(iii)  My third solution is each state to establish a State Escrow Account. (I’ve written an article on this and how it would work).  Each State would review the federal budget and determine which items are constitutional or not. It would then adjust the federal budget accordingly. Then it would determine the pro rata share of that budget that North Carolina residents would provide. The state would require all residents to have their federal income tax first reviewed by the State Treasury Department. Only the portion that corresponds to constitutional federal spending would be forwarded to the IRS and the remainder would be deposited in the State Escrow Account. The state would then determine for itself what to do with the escrow funds – either returning it to its residents or applying it to state projects, thus relieving the state of any un-necessary reliance on the federal government and moving the state towards the independence it was intended to have.

(iv)  My last solution is to keep welfare and the other means-tested social programs, but to treat them like state grants and attached strict conditions to recipient status. Remember, welfare and other such social entitlement programs are like state grants in that they both are an unconstitutional exercise of the taxing and spending power. Conditions should be attached for two essential reasons: (1) to ensure that recipients can only receive benefits for a LIMITED time (there will need to be time limits); and (2) to make it so burdensome that recipients will want to get off of government assistance as soon as possible, whether that means they will look at marriage and education more favorably or will invest in career training programs or will make sure they do not have further children which may tend to keep them dependent on government aid. Some conditions that should be placed on free government aid (ie, other people’s money) include:

  • Mandatory birth control. (No government check without first receiving a monthly birth control shot)
  • No increase in the welfare check and no additional funds should the recipient have another child while on public assistance
  • Suspension of the right to vote
  • Definite earmarks are attached to the funding. Funds can only go towards essential food items, housing, and transportation. Any person on government assistance who can afford a new car will be automatically kicked out of the program
  • No free cell phones
  • No visits to the nail salon
  • No funding for air-conditioning (Lowe’s sells a great $12 fan which works wonders in the heat)
  • Mandatory proof of job searches (including signed statements from each employer consulted, including the reason the person could not be considered or interviewed. Job searches will be viewed with extreme scrutiny for potential for fraud and abuse; for example, a person who has a criminal record should not be looking for a job with law enforcement or education, daycare, etc because such jobs expressly require employees to have no criminal background history)
  • Mandatory community college or GED courses for those who did not graduate high school or who barely graduated (those who severely lack the basic skills and knowledge imputed on an adult, or a young adult)
  • Mandatory college or community college courses for those who have no college diploma, associates degree, vocational training, etc (No government check without a report showing course status; if a person is not working, he or she must be developing their career and building valuable job skills)
  • Children of a person on welfare must be doing well in school (average or better)
  • Proof of citizenship must be provided (and confirmed by the Social Security Department). Identity fraud will result in immediate deportation
  • Recipients must show they are drug-free (mandatory drug-testing)
  • Random audits will be conducted
  • Mandatory visits from a social worker to assess the cleanliness and order of the home and the environment for the child (or children)
  • Recipients must be available for community service when the state government needs them

I’m sure there are other conditions that I haven’t thought of and I’m sure that others would make some suggestions of their own.  In fact, I would encourage those who have read this article to comment and add their suggestions.

Milton Friedman, an economist, was highly critical of welfare, and noted several times how it should be judged by its results and outcomes and not by its intentions.  He also said: “There’s been one underlying basic fallacy in this idea of welfare measures, and that is that it is feasible and possible to do good with other people’s money. That view has two flaws. If I want to do good with other people’s money, I first have to take it away from them. That means that the welfare state philosophy of doing good with other people’s money, at it’s very bottom, is a philosophy of violence and coercion. It’s against freedom, because I have to use force to get the money. In the second place, very few people spend other people’s money as carefully as they spend their own.”

If we are going to coerce and extort money from taxpayers, not merely to provide safety and security for the country or to legislate for the enumerated objects in Article I, Section 8, but also to support those who don’t want to even try to support themselves and their families, then the very least we should do is provide accountability to those taxpayers (those hard-working men and women whose paychecks are seized by the government for 1/3 of the year) and that is to attach strict and limiting conditions to welfare checks. The program, which would have to be run as one that is contractual in nature and not as a constitutional responsibility, must be so burdensome, so intrusive, so violative of freedom, and so unattractive to the recipient that he or she will absolutely want to spend as little time as possible on it.  Well that’s the hope anyway.

 

References:

John Perazzo, “How the Liberal Welfare Destroyed Black America,” Front Page Magazine, May 5, 2016.  Referenced at:  https://www.frontpagemag.com/fpm/262726/how-liberal-welfare-state-destroyed-black-america-john-perazzo

Mike Maharrey, “The General Welfare Clause is Not About Writing Checks,” The Tenth Amendment Center, August 28, 2014.  Referenced at:  https://tenthamendmentcenter.com/2014/08/28/the-general-welfare-clause-is-not-about-writing-checks/

Federalist No. 41 –  http://avalon.law.yale.edu/18th_century/fed41.asp

“Federal Aid to States and Local Governments,” Congressional Budget Office (CBO), April 18, 2018.  Referenced at: https://www.cbpp.org/research/state-budget-and-tax/federal-aid-to-state-and-local-governments

The Delegates Who Didn’t Sign the Constitution –  https://www.constitutionfacts.com/us-constitution-amendments/those-who-didnt-sign-the-constitution/

Delegates to the Constitutional Convention in Philadelphia (May 27 – September 1787) –  http://law2.umkc.edu/faculty/projects/ftrials/conlaw/marryff.html

“Federal Grants to State and Local Governments (1960-2017) – Chart Analysis,” Mercatus Center (George Mason University).  Referenced at:  https://www.mercatus.org/system/files/Federal-grant-aid-state-and-local-chart-analysis-pdf.pdf

“Federal Spending on Benefits and Services for People with Low Income: In Brief,” Congressional Research Service, Feb. 6, 2018.  Referenced at:  https://fas.org/sgp/crs/misc/R45097.pdf

“Spending for the General Welfare,” Cornell Law School.  Referenced at:  https://www.law.cornell.edu/anncon/html/art1frag29_user.html

Jefferson’s Opinion on the Constitutionality of a National Bank (1791), Avalon Project (Yale Law School).   Referenced at:  http://avalon.law.yale.edu/18th_century/bank-tj.asp

Grant Policy –  https://www.grants.gov/learn-grants/grant-policies.html

Federal Spending: Where Does the Money Go?,” National Priorities Project.  Referenced at:  https://www.nationalpriorities.org/budget-basics/federal-budget-101/spending/

Matthew J. Franck, “The Lawless Welfare State,” National Review, Jan. 13, 2013.  Referenced at:  https://www.nationalreview.com/magazine/2010/05/17/lawless-welfare-state/

 

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JUDICIAL ACTIVISM: Obstruction of Construction

JEFFERSON - versus Hamilton

by  Diane Rufino, September 21, 2017

In Honor of the 230th Anniversary of the US Constitution, and also to help promote Brion McClanahan’s latest book, HOW ALEXANDER HAMILTON SCREWED UP AMERICA, I wanted to post this important History Lesson —

The history surrounding the first Bank Bill (to charter a national bank), proposed to President Washington by his Secretary of the Treasury, Alexander Hamilton shows us exactly why the Federal Judiciary has become the greatest usurper of powers belonging to the States and to the People. It is an important lesson on constitutional interpretation.

Why is it important that we pay close attention to constitutional interpretation?  Because when the courts don’t bother to consult the proper original documents and commentary as authority on the meaning and intent of the provisions of the Constitution, and/or when they make the decision to disregard that history and that critical information (any student of contract laws knows the strict laws of construction that guide a contract’s interpretation), then any opinion in contradiction to that history and such commentary necessarily means that the judiciary has assumed power for the federal government that it was not intended to have. And where do those additional powers come from?  From the original depositories of government power, the People and then the States.

HISTORY –

In 1788, the US Constitution was adopted by the requisite number of states and hence, the government it created would go into effect. Later that year, elections were held, George Washington was elected our first president (and men like James Madison elected to the first US Congress), and the following year, 1789, the Union’s new government was assembled and inaugurated. One of the first decisions of the first Congress was to fund the debts that the individual states incurred in fighting the Revolutionary War. The question, of course, was how would it do that. Washington’s Treasury Secretary, Alexander Hamilton, long holding true to a belief that a large, powerful national government of centralized functions is the proper form of government for the new Union (although he conceded to the federal form that the majority of delegates at the Philadelphia Convention voted for), urged that Congress should charter a National Bank, after the British model. He took his suggestion to Washington and agreeing with Hamilton, a Bank Bill was introduced in Congress. But powerful state and government leaders, including Thomas Jefferson, Washington’s Secretary of State, James Madison, Congressman from Virginia, and several state leaders, particularly from Virginia, objected, characterizing such a bank as being “repugnant to the Constitution,” and assuming powers not expressly delegated to Congress in Article I. Washington then asked both Hamilton and Jefferson to provide him with memoranda outlining their arguments regarding the creation of such a National Bank.

(The Following section, as noted, is taken, in its entirety, from Kevin Gutzman’s book THOMAS JEFFERSON – REVOLUTIONARY (St. Martin’s Press, NY, 2017):

Jefferson began by describing the Bank Bill’s provisions, saying that he understood the underlying principle of the Constitution to be that “all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people.” (here is quoted the Tenth Amendment, which at the time lay before the state legislatures for their ratification).  Power to pass the bill had not been delegated to the United States, he insisted. It did not fall under the power to tax for the purpose of paying debts because the bill neither paid debts nor taxed. It did not fall under the power to borrow money because the bill neither borrowed nor ensured that there would be borrowing. It did not fall under the Commerce Clause for it did not regulate commerce. Jefferson understood ‘regulating commerce’ to mean “prescribing regulations for buying and selling,” which the Bank Bill did not do. If it did that, he continued, the bill “would be void” due to its equal effects on internal and external commerce of the states. “For the power given to Congress by the Constitution,” Jefferson continues, “does not extend to the internal regulation of the commerce of a State (that is to say of the commerce between citizen and citizen), which remain exclusively with its own legislature, but to its external commerce only; that is to say, its commerce with another State or with foreign nations or with the Indian tribes.”  No other enumerated power (Article I, Section 8) gave Congress ground for passing this bill either, he concluded.

Besides the enumerated powers, the General Welfare Clause and the Necessary and Proper Clause had also been invoked by the bill’s proponents. Jefferson disposed of those clauses deftly as well. First, the General Welfare Clause said that Congress had power “to lay taxes for the purpose of providing for the General Welfare (emphasis Jefferson’s). The reference to the general welfare, he insisted, was bound to the power to tax. It did not create a separate power “to do any act they please which might be for the good of the Union, which Jefferson thought the preceding and following enumerations of powers rendered entirely obvious. To read the General Welfare Clause any other way would make the enumerations “completely useless. It would reduce the whole instrument to a single phrase, that of instituting a Congress to do whatever would be good for the United States, and as they would be the sole judges of the good or evil, it would also be a power to do whatever evil they please.”

Jefferson, the skilled lawyer that he was, noted that one of the most basic rules of construction (contract law) cut strongly in favor of his argument. That rule states that “where a phrase will bear either of two meanings, to give it that which will allow some meaning to the other parts of the instrument, and not that which would render all the others useless.” Besides that, the Philadelphia Convention had considered and expressly rejected a proposal to empower Congress to create corporations. The rejection, he noted, was based partly on the fact that with such a power, Congress would be able to create a bank.

As for the Necessary and Proper Clause, Jefferson noted that it said that the Congress could “make all laws necessary and proper for carrying into execution the enumerated powers. But they can all be carried into execution without a bank. A bank therefore is not necessary and consequently, not authorized by this phrase (emphasis Jefferson’s).”  The Bank Bill’s proponents had argued for the great convenience of having a bank, which might aid in exercising powers enumerated in the Constitution, but Jefferson would have none of the idea that “necessary” could be twisted to mean “convenient.”

Jefferson concluded his memorandum with a brief statement on the president’s veto power, which he called “the shield provided by the Constitution to protect against the invasions of the legislature: (1) The right of the Executive. (2) Of the Judiciary. (3) Of the States and State legislatures.”  To his mind, the Bank Bill presented “the case of a right remaining exclusively with the States” – that of chartering a corporation. Congress’ attempt to take this right to itself violated the Constitution and Washington should veto the bill.

Washington did not agree. Instead, perhaps on the basis of Hamilton’s argument that Congress could adopt whatever kind of legislation it judged helpful in supervising the national economy, he signed the Bank Bill.   [Gutzman, Thomas Jefferson – Revolutionary, pp. 40-42]

THE IMPACT –

When a subsequent Bank Bill was challenged by the state of Maryland, in McCulloch v. Maryland (1819), Chief Justice John Marshall would revisit the arguments submitted to President Washington and as expected, he would side with Hamilton. Hamilton’s position, after all, would give the federal government a broad pen with which to write legislation, in contrast to the limits imposed on it by the very wording of the Constitution and the listing of the only powers that the States had delegated to the federal government. McCulloch was another in a series of cases written by Marshall usurping powers from other depositories and concentrating them in the federal government. The Supreme Court, a branch of the very federal government that it presides over, has consistently used its powers not to interpret the Constitution and offer opinions to other branches, but rather to secure a monopoly over the scope and intent of the government’s powers.

Marshall’s opinion in McCulloch gave Congress power that the States intentionally tried to prevent; he read a meaning and intent in the Constitution, in Article I, that was expressly rejected by the States when they debated and then signed the document on September 17, 1787. Marshall’s reading of Article I, in particular the “Necessary and Proper” Clause, gave Congress power “to which no practical limit can be assigned,” as James Madison put it.

With McCulloch, the Supreme Court committed a grave injustice to the system established by our founding fathers and our founding states. Marshall’s opinion directly contradicted an essential element of the states’ understating of the Constitution when they ratified it, and that understanding was that the Constitution created a federal government of express and limited powers so that the residuary of government power would remain reserved to the states and hence the sovereignty they long cherished would not be overly diminished by organizing into a Union.

And the history of judicial activism continued and still does ….

 

Reference:  Kevin Gutzman, Thomas Jefferson – Revolutionary, St. Martin’s Press, NY (2017).

Time for Another Tax Revolution: Abolish the Federal Income Tax and the IRS With It!

IRS

by Diane Rufino, July 3, 2013

The 16th Amendment states: “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.

The Sixteenth Amendment, which gave the American people the affliction of confiscatory income taxes, is 100 years old this year. It was ratified on February 3, 1913.

One hundred years of affliction is a long time. The time has come for tax reform….   No, the time has come for a tax revolution.

The IRS, which is in charge of collecting the income tax revenue, is 138 years old.  It was created by President Abraham Lincoln in 1862. It has gone from being an agency that terrorizes citizens over their tax returns to an agency that terrorizes citizens based on their speech and political viewpoint. Wouldn’t it be nice if the American people, being in charge of their government, could walk into the massive IRS building in DC and deliver the line that has made Donald Trump famous: “You’re Fired!”

The Sixteenth Amendment was proposed in 1909 and adopted in 1913. The proposal of a constitutional amendment to give Congress the power to impose an income tax began as a scheme of political maneuvering that went horribly awry.  In fact, the proponents, House and Senate Republicans who were in a battle for a new tariff bill, proposed the amendment as a political trick and expected the proposal to be killed by the States during the ratification phase, thereby making a popular and political statement that the American people in general do not want an income tax. But the plan backfired.  A brief overview of the history of the income tax, including the Sixteenth Amendment in the United States is provided below.

The Founding Fathers had rejected income taxes, as well as any other direct taxes, unless they were apportioned to each state according to population. At the time of our founding, wealth was measured in terms of property rather than income. Property was the goal of freedom. One exercised his inalienable rights to “pursue” happiness and obtain property.  Our founders didn’t talk much in terms of “income.” They rejected the income tax entirely, but when they spoke of taxes they recognized the need for uniformity and equal protection to all citizens. “All duties, imposts and excises shall be uniform throughout the United States.”  “Direct Taxes shall be apportioned among the several States.”  “No direct tax shall be laid, unless in proportion to a census.”  This is what the US Constitution  reads. Then, the 14th Amendment promised “equal protection of the laws” to all citizens.  The principle behind the progressive income tax – the more you earn, the larger the percentage of tax you must pay – would have been appalling to the founders. They recognized that, in James Madison’s words, “the spirit of party and faction” would prevail if Congress could tax one group of citizens and confer the benefits on another group.

In Federalist No. 10, Madison asked, “What are the different classes of legislators but advocates and parties to the causes which they determine?” He talked about political factions, the reasons for them, the “mischiefs” presented by them, and apportionment of taxes. He wrote, most prophetically:

A faction is a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.

      There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects.

      There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.

       It could never be more truly said than of the first remedy, that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it could not be less folly to abolish liberty, which is essential to political life, because it nourishes faction, than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency.

       The second expedient is as impracticable as the first would be unwise. As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other; and the former will be objects to which the latter will attach themselves. The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests. The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors, ensues a division of the society into different interests and parties.

       The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, according to the different circumstances of civil society. A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders ambitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes have been interesting to the human passions, have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good. So strong is this propensity of mankind to fall into mutual animosities, that where no substantial occasion presents itself, the most frivolous and fanciful distinctions have been sufficient to kindle their unfriendly passions and excite their most violent conflicts. But the most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views. The regulation of these various and interfering interests forms the principal task of modern legislation….

       The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. Every shilling with which they overburden the inferior number, is a shilling saved to their own pockets.

So, our founders took the view that taxation of wealth by the government should be equal and apportioned.

Before the Civil War, the government received most of it revenue through tariffs (that is, taxing goods as they came into the ports). The South, being an agricultural community, relied heavily on imports and therefore generated most of the tariff revenue for the government (at least 70%).  But then came the war, which meant ports were blockaded, ships were sunk, and in general, there was little money to spend on things that were not considered essential, and hence, there was almost no revenue from tariffs.  Besides, the southern states had seceded and formed a new county and so their tariff revenue did not go to the federal government. So during the Civil War, Congress decided to try an income tax. It devised a really clever plan to get people to pay. It made the tax returns public. Essentially what would happen was this: If your neighbor saw you driving around on a brand new plow, he’d inquire through the public record how much he reported on his income tax. In order to avoid scrutiny and accusations, the rich would pay their required taxes. And in fact, the income tax fell almost exclusively on the rich.

The financial requirements of the Civil War prompted the first American income tax in 1861. On August 5, Lincoln imposed the first federal income tax by signing the Revenue Act of 1861. Strapped for cash with which to pursue the Civil War, Lincoln and Congress came up with a tax scheme to impose a 3% tax on annual incomes exceeding $800. The Revenue Act’s language was broadly written to define income as gain “derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere or from any source whatever.” (Interestingly, according to the US Treasury Department, the comparable minimum taxable income in 2003, after adjustments for inflation, would have been approximately $16,000).  By 1862, however, the United States government realized that the war would not end quickly, and that revenue gained by this income tax would not be sufficient.  So the tax was repealed and replaced by another income tax, one of a progressive nature, in the Revenue Act of 1862.

Thus, it was the Revenue Act of 1862 that introduced the first progressive income tax in America.

The First Progressive Income Tax –

The Revenue Act of 1862 proved to be more effective at raising money to fund the War. It contained three main provisions: (i) it established the office of the Commissioner of Internal Revenue, a department in charge of the collection of taxes; (ii) it levied excise taxes on many (a majority of)  every day goods and services; and (iii) it introduced the first progressive tax.  Indeed, this new tax reflected the taxpayers’ “ability to pay” by separating citizens into multiple categories and taxing accordingly:

  • For individuals whose annual incomes were less than $600, no tax was collected.
  • For individuals whose annual incomes were greater than $600 and less than $10,000, a percentage of 3% of total income was demanded in tax.
  • For individuals whose annual incomes were greater than $10,000, a percentage of 5% of total income was demanded in tax.
  • The act also stated that in order to assure timely collection, income tax was “withheld at the source.”

After the war when the need for federal revenues decreased, Congress, in the Revenue Act of 1870, let the tax law expire in 1873. However, one of the challenges to the validity of this tax finally reached the Supreme Court in 1880. The challenge was brought by a taxpayer. In Springer v. United States, the taxpayer contended that the income tax on his professional earnings and personal property income violated the “direct tax” requirement of the Constitution; that is, that is needed to be apportioned among the states. The Supreme Court concluded that the income tax was not a “direct tax” but rather an “excise tax,” and hence did not need to be apportioned. The tax was upheld. [Excise taxes are taxes on the on the sale, or production for sale, of specific goods within a country. Excises are distinguished from customs duties, which are taxes on importation. Typical examples of excise duties are taxes on gasoline and other fuels, and taxes on tobacco and alcohol (sometimes referred to as sin tax].

Although the Revenue Act of 1862 was allowed to expire, government had already gotten a taste of the revenue that could be generated by taxing the income of American citizens, It wouldn’t be long before it looked once again to American purses. During the years of Reconstruction and rebuilding the nation, the growing industrial and financial markets of the eastern US generally prospered. But the farmers of the south and west suffered from low prices for their farm products, while they were forced to pay high prices for manufactured goods. Throughout the 1870′s and 1880′s, farmers formed various political organizations such as the People’s (Populist) Party and the National Farmers’ Alliance) and advocated for a graduated income tax to relieve them of their tax burden. And so, in 1894, a Democratic-led Congress passed the Wilson-Gorman tariff (a high tariff bill) which imposed the first peacetime income tax. The rate was 2% on income over $4000, which meant fewer than 10% of households would pay any income tax. The purpose of the tax was to make up for revenue that would be lost by tariff reductions. This was a controversial provision at the time and it was almost immediately struck down by the Supreme Court in 1895, in a case calledPollock v. Farmers Loan & Trust Company.  Once again, a taxpayer challenged the legality of the income tax. In Pollock, a taxpayer sued the corporation in which he owned stock, contending that they should never have paid the income tax because it was unconstitutional. In this case, the tax was paid on income from land, and Mr. Pollock argued that since a tax on real estate is a direct tax, then a tax on the income from such property must be a direct tax as well. Since the Constitution prohibited a “direct tax” unless certain conditions are met, Pollock argued that the income tax should be declared unconstitutional. (The “direct tax” argument had also been used by Mr. Springer in 1880, but because the income tax had been expired for eight years at that point, it is believed that the Court just wasn’t interested in looking closely at the wording in the Constitution and making distinctions between the different types of taxes).

The Court in Pollock held that the income tax was a direct tax and as such, it had to be apportioned among the states according to their populations, as the Constitution sets forth in Article I, Section 2, clause 3 and in Article I, Section 9, clause 4. Since the tax at issue was not apportioned, it was struck down as unconstitutional.

The provisions at issue in the Pollock (and Springer) cases are as follows:  Article I, Section 2, clause 3: “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.”  Article I, Section 8, clause 1 provides that “all duties, imposts, and excises shall be uniform throughout the United States.”  Article I, Section 9, clause 4 provides that “no capitation, or other direct tax shall be laid, unless in proportion to a census or enumeration herein before to be taken.”  Section 2 of the Constitution deals with the House of Representatives specifically. Section 8 gives to Congress certain enumerated powers. And Section 9 lists what is prohibited to Congress.

How does apportionment work, as per Article I, Section 2, clause 3?  How would an “apportioned” income tax work?  If an income tax is subject to apportionment, a state with one-tenth the national population, for example, has to bear one-tenth the aggregate tax liability, regardless of the state’s financial condition. Suppose the populations of Iowa and Maine were equal, but Iowa’s per capita income were twice Maine’s. The rates for an apportioned income tax would have to be twice as high in Maine, the poorer state, as in Iowa.

How is direct tax supposed to based on a census, as per Article I, Section 9, clause 4?  If the government desired to raise $10 million and New York had 20% of the total U.S. population at that time, then New York would be required to raise $2 million. If New York had 1 million residents, each resident would owe $2 in taxes. Obviously, a tax based on income could not achieve such proportionality, since incomes differed across individuals.

By the turn of the century, the progressive movement was entrenched in politics. It was the era of social unrest. The movement began after the Reconstruction era (the 1890′s) in order to modernize society to the new industrial age. The movement was based on the assumption that the old principles of our founding were no longer adequate and so it sought to reform society and the role of government by addressing certain economic, political, and cultural issues. The common view of the Progressive movement, aside from the dismantling of traditional institutions and founding principles, was that government would need to grow and be actively involved in these reforms at every level. Furthermore, it held that the existing constitutional system was too constrained and outdated and must be transformed into a dynamic, evolving instrument to effect social change. Another theme was that the focus of government on the rights of the individual would have to be surrendered to seek the best for society as a whole. In certain aspects, such as basic rights and protections for factory workers, the movement helped government serve society well. But in many other aspects, such as the movement’s inherent hostility and resentment of the wealthy and its need to increase taxation to seek social justice, government veered sharply from its constitutional course.

At the same time, as public sentiment was changing, so did the complexion of the Supreme Court. The idea of using a tax to “soak the rich” began to take root among liberals in both major parties. Several times the Democrats introduced bills to provide a tax on higher incomes but each time the conservative branch of the Republican party killed it in the Senate. The Democrats used this as evidence that the Republicans were the “party of the rich” and should be thrown out of power.

In a speech on April 14, 1906, President Theodore Roosevelt endorsed a progressive estate tax:

“It is important to this people to grapple with the problems connected with the amassing of enormous fortunes, and the use of those fortunes, both corporate and individual, in business. We should discriminate in the sharpest way between fortunes well-won and fortunes ill-won; between those gained as an incident to performing great services to the community as a whole, and those gained in evil fashion by keeping just within the limits of mere law-honesty.

      Of course no amount of charity in spending such fortunes in any way compensates for misconduct in making them. As a matter of personal conviction, and without pretending to discuss the details or formulate the system, I feel that we shall ultimately have to consider the adoption of some such scheme as that of a progressive tax on all fortunes, beyond a certain amount either given in life or devised or bequeathed upon death to any individual — a tax so framed as to put it out of the power of the owner of one of these enormous fortunes to hand on more than a certain amount to any one individual; the tax, of course, to be imposed by the National and not the State Government.  Such taxation should, of course, be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.” 

In 1907, he stepped up his campaign for several progressive additions to the nation’s tax system. In his message to Congress on December 7, he urged lawmakers to consider an income tax:

      “When our tax laws are revised the question of an income tax and an inheritance tax should receive the careful attention of our legislators. In my judgment both of these taxes should be part of our system of Federal taxation. I speak diffidently about the income tax because one scheme for an income tax was declared unconstitutional by the Supreme Court; while in addition it is a difficult tax to administer in its practical working, and great care would have to be exercised to see that it was not evaded by the very men whom it was most desirable to have taxed, for if so evaded it would, of course, be worse than no tax at all; as the least desirable of all taxes is the tax which bears heavily upon the honest as compared with the dishonest man. Nevertheless, a graduated income tax of the proper type would be a desirable feature of Federal taxation, and it is to be hoped that one may be devised which the Supreme Court will declare constitutional.”

The inheritance tax was even more desirable, Roosevelt continued. Not only did it serve the cause of social justice, but it had been upheld by the federal courts:

“The inheritance tax, however, is both a far better method of taxation, and far more important for the purpose of having the fortunes of the country bear in proportion to their increase in size a corresponding increase and burden of taxation. The Government has the absolute right to decide as to the terms upon which a man shall receive a bequest or devise from another, and this point in the devolution of property is especially appropriate for the imposition of a tax. Laws imposing such taxes have repeatedly been placed upon the National statute books and as repeatedly declared constitutional by the courts; and these laws contained the progressive principle, that is, after a certain amount is reached the bequest or gift, in life or death, is increasingly burdened and the rate of taxation is increased in proportion to the remoteness of blood of the man receiving the bequest.”

Roosevelt rejected arguments that an estate tax would penalize thrift.

“A heavy progressive tax upon a very large fortune is in no way such a tax upon thrift or industry as a like would be on a small fortune. No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood. We have not the slightest sympathy with that socialistic idea which would try to put laziness, thriftlessness and inefficiency on a par with industry, thrift and efficiency; which would strive to break up not merely private property, but what is far more important, the home, the chief prop upon which our whole civilization stands. Such a theory, if ever adopted, would mean the ruin of the entire country–a ruin which would bear heaviest upon the weakest, upon those least able to shift for themselves. But proposals for legislation such as this herein advocated are directly opposed to this class of socialistic theories. Our aim is to recognize what Lincoln pointed out: The fact that there are some respects in which men are obviously not equal; but also to insist that there should be an equality of self-respect and of mutual respect, an equality of rights before the law, and at least an approximate equality in the conditions under which each man obtains the chance to show the stuff that is in him when compared to his fellows.”

The Bailey Bill –

In 1909, progressives in Congress were talking once again about enacting an income tax. They were going to  attempt, once again, to attach a provision for an income tax to a tariff bill. President William Howard Taft had called Congress into a special session in 1909, shortly after his inauguration, to discuss the issue. He wanted Congress to address tariff reform. House of Representatives immediately passed a tariff bill sponsored by Sereno E. Payne (R-NY), the House Majority Leader, which called for reduced tariffs, but including an inheritance tax to make up for lost revenue. However, the Senate quickly substituted a bill, written by Senator Nelson W. Aldrich (R-RI), Senate Majority Leader and chairman of the Senate Finance Committee, which called for fewer reductions and more increases in tariffs. Aldrich was a long-time advocate of protective tariffs. His answer was to increase the amount of duty items. The problem, however, was that there was an impending budget deficit that had to be addressed. A protracted debate ensued, and progressive Republicans maneuvered to add an income tax amendment to the Aldrich bill. In April, Senators Joseph W. Bailey, a populist Democrat from Texas, and Albert B. Cummins, a progressive Republican from Iowa, introduced separate versions of an income tax provision.  A compromise version was reached between the two – which became known as the Bailey-Cummins amendment – for inclusion in the Senate bill. In response to this amendment, Senator Aldrich defiantly declared: “There will be no income tax, no inheritance tax, no stamp tax, and no corporation tax!”  It soon became evident, however, that the opposition, comprised of Democrats and progressive Republicans from the Midwest, had enough votes to force the issue in the Senate and thereby enact an income tax.  Seeking to avoid that humiliation, Aldrich met with President Taft.

In a message to a joint session of Congress on June 16, Taft first reiterated his support for tariff reform but warned of an impending budget deficit.  On June 16, in a joint message to Congress, Taft  In order to fend off Congress’ proposed initiative for an income tax but yet provide for a mechanism to raise the revenue necessary (while making tariff reduction possible!), Taft  recommended that Congress enact a tax of 2% on the income of a corporation “for the privilege of carrying on or doing business as a corporation in the United States.” (Taft predicted – accurately, as it would later turn out – that the Supreme Court would view the corporate tax as an “excise” tax and not a “direct tax”). In his message, President Taft also endorsed the idea for a constitutional amendment that would grant Congress authority to impose a progressive income tax.

The debate in Congress was whether to include the income tax provision (Bailey-Cummins amendment) or the corporate tax provision in the tariff bill. This was June. Progressive Republicans (also known as “insurgent” Republicans) were joining the Democratic block in support of the income tax.  Their position on income tax was summed up by comments made by Rep. William Sulzer (D-NY) on the House floor:

“I am now, always have been, and always will be in favor of an income tax, because, in my opinion, an income tax is the fairest, the most just, the most honest, the most democratic, and the most equitable tax ever devised by the genius of statesmanship. . . . At the present time nearly all the taxes raised for the support of the Government are levied on consumption—on what the people need to eat and to wear and to live: on the necessities of life; and the consequence is that the poor man, indirectly, but surely in the end, pays practically as much to support the Government as the rich man—regardless of the difference of incomes. This system of tariff tax on consumption, by which the consumers are saddled with all the burdens of Government, is an unjust system of taxation, and the only way to remedy the injustice and destroy the inequality is by a graduated income tax that will make idle wealth as well as honest toil pay its share of the taxes needed to administer the National Government.”

The showdown by Democrats and Progressives regarding the Bailey amendment was perhaps intentionally orchestrated. The theory was that after the regular Republicans rejected the bill, the Democrats could then point a finger at them and claim, for political purposes, that Republicans rejected the Bailey bill to protect their corrupt wealthy corporate friends. They would use the rejection as proof of such an alignment between Republicans and the wealthy.

The conservative Republicans knew what the Democrats were up to and they launched a counter move. Facing an embarrassing loss on the income tax issue, regular Republicans in the Senate decided to make a political maneuver, capitalizing on the endorsement of a constitutional amendment made by President Taft. They proposed a constitutional amendment that would impose an income tax on the rich. The theory behind their plan was that  when the States refused to ratify the amendment, the Republicans could use that failure as proof that the people, through their State legislatures, were against the idea of a new income tax.  They could then use that argument to defeat the Bailey Bill, for how could Congress approve an income tax against the rich after the people, through their state legislatures, had spoken on the issue. Conservative Republicans were sure they did their homework. They were most certain that it could and would be defeated when it went to the states for ratification. They calculated that there were more than enough conservative states to defeat the 3/4 majority that were required under Article V to approve an amendment.

Senator Norris Brown (R-NE) was the first to propose an income-tax amendment to the Constitution, on June 17, 1909, but it was rejected. On June 28, Senator Aldrich submitted a proposal (Senate Joint Resolution 40). It authorized Congress 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.” It passed the Senate by a vote of 77 to 0, with 15 members abstaining. On July 12, the proposal passed in the house, by a vote of 318 to 14. The resolution proposing the 16th Amendment therefore passed the 61st Congress and was submitted to the state legislatures.

Once the amendment was submitted, it was clear that it had more support than was anticipated. Rep. Sereno Payne, a conservative Republican, was so concerned and was so convinced that their plan would backfire that he took to the House floor, denounced the resolution that he himself introduced in the House, and made a last-ditch effort to appeal to Congress:

As to the general policy of an income tax, I am utterly opposed to it. I believe with William Gladstone that it tends to make a nation of liars. I believe it is the most easily concealed of any tax that can be laid, the most difficult of enforcement, and the hardest to collect; that it is, in a word, a tax upon the income of honest men and an exemption, to a greater or lesser extent, of the income of rascals; and so I am opposed to any income tax in time of peace…I hope that if the Constitution is amended in this way the time will not come when the American people will ever want to enact an income tax except in time of war.”

Not all states were initially in favor of an amendment. The gamble that the conservative Republicans were taking at first seemed to pay off.  Many states realized that the imposition of a federal income tax would mean the rise of a federal revenue bureaucracy that extended from Washington, D.C., throughout the country and into the personal and business transactions of every American and every business. Private transactions would no longer be private; government would be able to monitor what everyone was doing.

Richard E. Byrd, speaker of the Virginia House of Delegates, voiced his concerns on March 3, 1910, during the debate on whether to ratify the 16th Amendment:

“It means that the state must give up a legitimate and long established source of revenue and yield it to the Federal government. It means that the state actually invited the Federal government to invade its territory, to oust its jurisdiction and to establish Federal dominion within the innermost citadel of reserved rights of the Commonwealth. This amendment will do what even the 14th and 15th Amendments did not do — it will extend the Federal power so as to reach the citizens in the ordinary business of life. A hand from Washington will be stretched out and placed upon every man’s business; the eye of a Federal inspector will be in every man’s counting house.

      The law will of necessity have inquisitorial features, it will provide penalties. It will create a complicated machinery. Under it, businessmen will be hauled into courts distant from their homes. Heavy fines, imposed by distant and unfamiliar tribunals, will constantly menace the taxpayer. An army of Federal inspectors, spies and detectives will descend upon the state. They will compel men of business to show their books and disclose the secrets of their affairs. They will dictate forms of bookkeeping. They will require statements and affidavits. On the one hand the inspector can blackmail the taxpayer and on the other, he can profit by selling his secret to his competitor.

      When the Federal government gets a strangle hold on the individual businessman, state lines will exist nowhere but on the maps. Its agents will everywhere supervise the commercial life of the states…. I am not willing by any voluntary act to give up revenue which the State of Virginia herself needs, nor to surrender that measure of state’s rights which was, and the construction of the Federal courts have permitted to remain.”

Much to everyone’s surprise, the amendment was ratified by one state legislature after another, and on February 25, 1913, with the certification by Secretary of State Philander C. Knox (Woodrow Wilson had just taken office), the Sixteenth amendment took effect.  “Soaking the Rich” was clearly a popular policy. “Shifting the growing burden of federal finance to the wealthy” make a lot of sense to those who, at the time, were sure they weren’t in the income bracket that would be targeted.  The end run of the Republican leadership did indeed backfire.

As James Madison had feared, the seeds of class warfare were sown in the strategy of different rates for different incomes.

Not only were conservative Republicans burned by their attempt to end Congress’ scheming for a progressive income tax by in fact ensuring that such a tax would become the law of the land, but the Payne-Aldrich Tariff Act of 1909 was also passed and signed by President Taft on August 5, 1909. (The corporate tax was reduced to 1% by the time the bill was signed)

[As a side note, the bill hurt Taft greatly, and in fact, would have disastrous consequences for the Republican Party in general. Lowering the tariff caused a big split in the party by pitting producers (manufacturers and farmers) against merchants and consumers. Failure to address tax reform was another sore spot. The debate split the Republican Party into Progressives and Old Guards and led the split party to lose the 1910 congressional election. Two years later, with the 1912 presidential election, the tariff issue continued to split votes amongst Republicans in most states, resulting in Democratic candidate Woodrow Wilson being elected. That was the election where Teddy Roosevelt returned to politics to “save the Republican party from Taft” by running for president under the new political party he created, the Progressive Party – commonly called the “Bull Moose.” He had entered the race too late and Taft has already secured the GOP nomination].

It turns out that Sixteenth Amendment was Congress’ way to get around the Pollock decision (much the way the 14th Amendment got around the Dred Scott decision) and enact an income tax, progressive in nature, without having to worry about whether the tax is classified as “direct” or not and whether it needs to be apportioned among the states on the basis of population.

It should be noted that there is credible evidence to suggest that the 16th Amendment was not properly and legally ratified pursuant to the requirements set out in Article V of the US Constitution (the “Amendment Process”).   See the Appendix for a summary of this evidence, as researched by Bill Benson.

How the Income Tax Grew –

On April 21, 1913, the House Committee on Ways and Means, chaired by Rep. Oscar W. Underwood (D-AL), took up consideration of a revenue bill, which included tariff reductions as well as an income tax. The Underwood bill (H.R. 3321) was heartily approved by the Democratic-controlled House but reached opposition in the Senate. While the bill was clearly a Democratic bill, it was the Democrats and regular Republicans that wanted the most modest progressive tax rates. It was the progressives, on the other hand, that wanted higher rates.  For the conservative (regular) Republicans and the vast majority of Democrats, wealth redistribution of any significance was not among the sanctioned uses. When Robert La Follette, the progressive Republican from Wisconsin proposed a maximum individual income tax of 10% and an inheritance tax reaching 75%,  John Sharp Williams (D-MS) protested that “the object of taxation is not to leave men with equal incomes after you have taxed them.”  Explaining that the Democrats had no such radical intentions for the power to impose an income tax, Williams declared:

No honest man can wage war upon great fortunes, per se. The Democratic party never has done it, and when the Democratic party begins to do it, it will cease to be the Democratic party and become the Socialistic party of the United States; or better expressed, the Communistic Party of the United States.”

Neither traditional Democrats nor regular Republicans were willing to use income taxation to redistribute wealth.  Such a radical policy was repudiated by all but a handful of Progressives and Populists on the fringe. Senator Henry Cabot Lodge (R-MA) warned that “it will be an evil day for us when we enter on confiscation of property under the guise of taxation.”  The income tax of 1913 was intended to raise revenue to finance tariff reduction and not to level incomes or to destroy the wealthy as a class. According to those representatives who looked at the income tax objectively, they believed it was only fair that the wealthy pay the bulk of the income tax because they benefited most from the high tariffs. In other words, they felt it was only “equitable” that they should contribute their “fair share” of the cost of government via the federal income tax.

On October 3, the Underwood bill was signed into law by President Woodrow Wilson. It enacted the first income tax – a minor income tax – under the authority of the new constitutional amendment. After decades of political controversy and conflict, the federal government once again had an income tax. To be sure, this was a minor levy. Most federal revenue still came from the tariff and federal excise taxes (especially those on alcohol and tobacco products).  Corporations were subject to a flat tax of 1%, with no exemption allowed and for individuals, a tax of 1% was imposed on income above $3,000 for single taxpayers (and above $4,000 for married couples). Those were very generous exemptions, as fewer than 4% of families had an annual income

of $3,000 in 1913. As a result, less than 1% of the population (or 2% of households) was subject to income taxation the first year of the new tax regime. With regard to the progressive aspect of the tax, there was a surtax of 1% imposed on income above $20,000 and 6% on incomes above $500,000.  Thus, the maximum marginal rate reached 7% on income above $500,000. In 1913, there were very few taxpayers in that upper bracket.  The tax provided for only a handful of exemptions, exclusions, and deductions, and the same tax rate applied to both earned and unearned income.

All that would change over the next 100 years. Even more dramatically, it would require only a few years for the federal income tax to become the chief source of income for the government, far outdistancing tariff revenues.  The age of big government had officially begun.

The Underwood Act defined taxable income as:

“….. 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…”

And the Act then provided, in part:

  • An income tax of 1% on individual income over $3,000 (or $4,000 for married couples), up to incomes of $20,000.
  • A progressive surtax ranging from 1% to 6%, depending on income.
  • Returns for the new tax were to be kept secret
  • Exemptions for charitable organizations (using language from the 1894 and 1909 tariff bills with regard to charitable purpose – Under these statutes, tax exemption was granted to “any corporation or association organized and operated exclusively for religious, charitable, or educational purposes…” In other words, these organizations were to be considered “non-profits”; Under the 1913 bill, tax-exempt organizations could earn tax-free income from both mission-related activities and commercial business activities that were unrelated to the purpose for which they were exempt, as long as they used the net profits for exempt purposes. That would change with the Revenue Act of 1950)
  • Income taxes to be collected at the source, meaning that some kinds of income would be taxed before it reached the taxpayer, as with the modern system of tax withholding.
  • The Bureau of Internal Revenue established a Personal Income Tax Division to collect the new tax. (Recall that the IRS has its roots in the Lincoln administration. The position of Commissioner of Internal Revenue, within the Treasury Department, was created by the Revenue Act of 1862).
  • In general, it established the modern federal income tax system

When the Act was passed and sent out to the people, Congress predicted confidently that “all good citizen will willingly and cheerfully support and sustain this, the fairest and cheapest of all taxes.” And indeed it was harmless at first. The first tax ranged from merely 1% on the first $20,000 of taxable income and was only 7% on incomes over $500,000. Who could complain?  (How harmless was this tax?  Famed author, Cleon Skousen, put it this way: “If the tax was expressed in 1994 dollars, this sentence (above) would read, ‘the first tax ranged from merely 1% on the first $298,000 of taxable income and was only 7% on incomes above $7,460,000.’”)

In the beginning, hardly anyone had to file a tax return because the tax did not apply to the vast majority of America’s work-a-day citizens. As mentioned above, when the tax was first imposed, only 1% of the population was subject to a federal income tax.  In 1939, twenty-six years after the Sixteenth Amendment was adopted, only 5% of the population, counting both taxpayers and their dependents, was required to file returns. In 1994, more than 80% of the population were required to file and pay.  Today, it is 50% of the population.

Those who support this scheme of taxation are exactly what our Founders warned us about.  Thomas Jefferson wrote: “To take from one, because it is thought his own industry and that of his father’s has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.”    

Today, it is still a popular idea to tax the wealthy so that the less fortunate can live easier and more comfortably with their more modest salaries and without having any income tax liability. For example, 82% of Democrats polled in 2011 supported raising taxes on millionaires (compared to 54% of Republicans). In 2008, 58% of Americans (mind you, 48-49% weren’t required to pay income taxes) thought it was a good idea to raise taxes for the wealthy (by wealthy, they meant those who have an income in excess of $250,000)  in order to pay for “new government programs and tax cuts for those making less money,” as well as to help lower the nation’s deficit.

As our Founders would frown upon that mindset if they were here today, they would surely comment: Those who don’t respect the rights of others don’t deserve it for themselves.

American economist Thomas Sowell has written quite a lot about this mindset of allowing the government to arbitrarily decide what is considered “poverty” and what is considered “wealth.” When that happens, of course, classes of people are treated differently. Different sets of standards and rules apply, which is not what “Equal Protection of Laws” is all about. Even worse, Sowell writes, is allowing the people themselves to decide when others should be taxed. That is exactly what Founders like James Madison labored to avoid. He referred to a democracy as “mob rule.” He, as well as the other Founders, understood that individual rights could never be secure in a pure democracy. A republic – a constitutional republic – would be the system of choice.

A republic is representative government ruled by law (specifically, the US Constitution). That’s why we say that we are a nation of laws and not of men.  A democracy, on the other hand, is government ruled by the will of the majority (mob rule; “mobocracy”). Benjamin Franklin defined it as: “A democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote!” And Thomas Jefferson defined: “A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”

A republic recognizes the unalienable rights of individuals (which no majority rule can violate) while democracies are only concerned with the wants or needs of a majority group. Social justice is easier to pursue when there is mob rule or when the rule of law disintegrates.

In a constitutional republic as ours, lawmaking is a slow, deliberate process, requiring approval (and surviving scrutiny) from all three branches of government, in order that cool heads prevail and the fairest laws are produced.  In a democracy, laws are passed by majority polls or voter referendums. 50% plus 1 vote (ie, the majority) is enough to take away anything away from the 50% minus 1 vote (ie, the minority). For purposes of this article, a perfect example would be this: If 51% of the people don’t pay taxes and want to keep up that lifestyle or even want more from those 49% that pay taxes, they can easily vote a tax increase. Income is no longer a protected property right in the United States, thanks to the Sixteenth Amendment, so in effect, taxation is subject to mob rule. And to the conscience of every elected official in Washington DC.

History records that democracies always self-destruct when the non-productive majority realizes that it can vote itself handouts from the productive minority by electing the candidate promising the most benefits from the public treasury. These candidates, in order to remain popular, must adopt ever-increasing tax and spend policies to satisfy the ever-increasing desires of the majority. As taxes increase, the incentive to produce decreases, causing many of the once productive to drop out and join the non-productive. When there are no longer enough producers to fund the legitimate functions of government and the socialist programs, the democracy inevitably collapses due to economic depression and chaos, and almost always, it is followed by some sort of dictatorship or socialist/communist regime. Prior to its decline (around 100-44 BC), Roman emperors couldn’t meet the demands of its poor They taxed heavily to provide “bread and circuses” (free grain, gladiator games) to the poor and the disillusioned – those who no longer valued historic Roman civic virtues. This system of state bribery worked for awhile; it placated them so that they wouldn’t riot and cause problems for the Emperor. “For the People who once upon a time took an interest in military command, high civil office, the legions, and the state of the republic, they now restrain themselves and anxiously hope for just two things: bread and circuses.” But in the end, the policies disillusioned too many Romans and the empire simply wasn’t worth fighting for any longer.

Back to Thomas Sowell and his views regarding the government’s power to arbitrarily decide what is considered “poverty” and what is considered “wealth” for purposes of re-distribution…  On that subject, he wrote:

“Leaders of the left in many countries have promoted policies that enable the poor to be more comfortable in their poverty. But that raises a fundamental question: Just who are ‘the poor’? … ‘Poverty’ once had some concrete meaning — not enough food to eat or not enough clothing or shelter to protect you from the elements, for example. Today it means whatever the government bureaucrats, who set up the statistical criteria, choose to make it mean. … Most Americans with incomes below the official poverty level have air-conditioning, television, own a motor vehicle and, far from being hungry, are more likely than other Americans to be overweight. But an arbitrary definition of words and numbers gives them access to the taxpayers’ money. This kind of ‘poverty’ can easily become a way of life, not only for today’s ‘poor,’ but for their children and grandchildren. Even when they have the potential to become productive members of society, the loss of welfare state benefits if they try to do so is an implicit ‘tax’ on what they would earn that often exceeds the explicit tax on a millionaire. If increasing your income by $10,000 would cause you to lose $15,000 in government benefits, would you do it? In short, the political left’s welfare state makes poverty more comfortable, while penalizing attempts to rise out of poverty.”   

“Soaking the Rich” or Re-distribution of Wealth? –

So, did the income tax actually “soak the rich” as the slogan described?  The wealthy, especially the super-wealthy, had anticipated the adoption of a progressive federal income tax and had created a clever device to protect their riches. It was called a “charitable foundation.” The idea was to co-sign the ownership of wealth, including stocks and securities, to a foundation and then get Congress and the state legislatures to declare all such charitable institutions exempt from taxes. By setting up boards which were under the control of these wealthy benefactors they could escape the tax and still maintain control over the disposition of their fabulous fortunes.

In fact, long before the federal income tax was in place, multimillionaires such as John D. Rockefeller, J.P. Morgan, and Andrew Carnegie had their foundations set up and operating. What they needed to do was make certain that the tax bill passed by Congress contained a provision specifically exempting their treasure houses from taxation. And sure enough, the Underwood bill included such a provision (Section 2, paragraph G). The bill borrowed language from the 1894 and the 1909 tariff bills, both of which provided exemptions for charitable organization. Under these statutes, tax exemption was granted to “any corporation or association organized and operated exclusively for religious, charitable, or educational purposes…” In other words, these organizations were to be considered “non-profits.” Under the 1913 bill, charitable (non-profit) organizations could earn tax-free income from both mission-related activities and commercial business activities that were unrelated to the purpose for which they were exempt, as long as they used the net profits for exempt purposes. (That would change with the Revenue Act of 1950; In 1950, Congress established the “unrelated business income tax,” or UBIT, which would be imposed on any activity that was not “regularly carried on” and “substantially related” to the organization’s charitable purpose).

Section 2, paragraph G provides: “Provided, however, that nothing in this section shall apply…to any corporation or association organized and operated exclusively for religious, charitable, scientific or educational purposes.” This magical provision locked up the riches of the super wealthy for all of their foundations were specifically designed to qualify under one or more of these categories.

Within a few years, President Woodrow Wilson would hijack the income tax to pay for WWI. He would tax the very wealth at 67% and then up to 77%.  On April 2, 1917, he stood before a joint session of Congress, requesting a declaration of war. This, of course, led to an even greater need for additional revenue. The debate over taxing versus borrowing to finance the war raged over several months across the country. Taxes would have to be increased.  But what taxes should be imposed, and by how much? Once again the question was raised as to whether to broaden the tax base or raise the rates on the wealthiest. The War Revenue Act of 1917 imposed a 2% tax on individual incomes over $1,000 (or $2,000 for married couples), featured graduated surtaxes reaching as high as 67% (63% on incomes over $1 million and 67% on incomes over $2 million), and increased a variety of excises and duties (including on automobiles). It also added an additional tax of 4% to the existing corporate income tax. Revenue grew exponentially. In the years prior to 1917, the Bureau of Internal Revenue (BIR) took in an average of about $281 million. In the years following the War Revenue Act of 1917, the average was $2.78 billion….   ten times the amount of tax revenue!

The Agency grew dramatically; it had to. The number of income tax returns that were filed after the Act of 1917 increased by over 1000%.

In his famous “Politics is Adjourned” address to a joint session of Congress on May 27, 1918, President Wilson made a strong pitch for more revenues. He urged: “Our financial program must sustain it to the utmost. Our financial program must no more be left in doubt or suffered to lag more than our ordnance program or our ship program, or our munitions program or our program for making millions of men ready.” In defense of the new taxes requested on war profits, he said the American people were not just willing to send their men to possible death overseas, but “to bear any burden or undergo any sacrifice” to win the war including taxes. “We need not be afraid to tax them, if we lay taxes justly.” If the American people know that the burden is being distributed equally, he went on, “they will carry it cheerfully and with a sort of solemn pride.”  Wilson made it sound almost as if Americans were actually seeking a tax increase in order to feel the joy of sacrificing their hard earned money for a righteous cause.

And so, the Revenue Act of 1918 (which actually passed in early 1919) increased taxes further. Corporations were given an exemption of $2,000, but rates were raised to 12% on net taxable income and the surcharge on the highest incomes was increased to 77%.  The income tax now occupied a central place in the federal revenue system. In 1916, income taxes had been providing 16% of federal revenue, but from 1917 to 1920, that percentage ranged as high as 58%. The tax was now a pillar of federal finance. Still, however, it remained a narrow levy on the American people. In 1920, only 5.5 million returns showed any tax due.

By 1919, there was a clear and broad consensus that held that steep wartime tax rates were unsustainable. Even Wilson himself finally agreed, and in his State of the Union that year, he suggested the possibility of reducing taxes.  A series of tax cuts (called Mellon tax cuts, for Andrew Mellon, the Treasury Secretary at the time) began in 1921, as legislators from both parties set about revising the wartime tax system. In the end, the tax cuts in the Revenue Act of 1921 were generally a disappointment for everyone and actually included a hike in the corporate tax rate.

Herbert Hoover and Franklin D. Roosevelt, using the excuses of depression and war, permanently enlarged the income tax. Under Hoover, the top rate was hiked from 24 to 63%. Under Roosevelt, the top rate was again raised – first to 79% and later to 90%.  [If he had his way, in 1941, a 99.5% marginal tax rate of 99.5% would have been imposed on all incomes over $100,000. That was his proposal. After that proposal failed, Roosevelt issued an executive order to tax all income over $25,000 at the astonishing rate of 100%. Congress later repealed the order, but still allowed top incomes to be taxed at a marginal rate of 90%].

It was one thing to impose taxes but another to collect them. The collection process was greatly facilitated in 1943 by a device created by President Franklin D. Roosevelt to pay the costs of WWII.  It was the tax withholding provision, also called “withholding from wages and salaries.” In other words, income tax would be collected at the source – collected at the payroll window before it was paid to the taxpayer.  Economists point out that this device, more than any other single factor, shifted the tax from its original design as a tax on the wealthy to a tax on the masses – mostly the middle class.

In 1946, Beardsley Ruml, then the chairman of the Federal Reserve Bank of New York, wrote an article in American Affairs in which he explained the real function of the income tax. The article was entitled “Taxes for Revenue Are Obsolete.” Ruml theorized that with the Federal Reserve, an institution and mechanism were in place to provide the federal government with a constant and virtually unlimited flow of dollars. That, of course, is inflationary, so Ruml believed that income taxes served the purpose of dampening inflation by lowering demand, a measure achieved by reducing the purchasing power of the masses by taking money out of their paychecks.

That was but one purpose of taxation, according to Ruml. The other was the redistribution of wealth from one class of citizens to another. Though done under the banner of social justice and equality, the real purpose was to supplant the decisions of a free people in a free market with the rule of the masters of a planned economy. As Ruml put it in his own words:

“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 of income. These taxes should be defended and attacked in terms of their effect on the character of American life, not as revenue measures.”

T. Coleman Andrews, who served as Commissioner of the IRS for nearly 3 years during the early 1950s, made the following remarks after his resignation in 1955:

Congress, in implementing the Sixteenth Amendment, went beyond merely enacting an income tax law and repealed Article IV of the Bill of Rights, by empowering the tax collector to do the very things from which that article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of government agents and set the stage for searches of our books and vaults and for inquiries into our private affairs whenever the tax men might decide, even though there might not be any justification beyond mere cynical suspicion.

The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember that under the Sixteenth Amendment, Congress can take 100% of our income anytime it wants to. As a matter of fact, right now it is imposing a tax as high as 91%. This is downright confiscation and cannot be defended on any other grounds.

      The income tax is bad because it was conceived in class hatred, is an instrument of vengeance and plays right into the hands of the communists. It employs the vicious communist principle of taking from each according to his accumulation of the fruits of his labor and giving to others according to their needs, regardless of whether those needs are the result of indolence or lack of pride, self-respect, personal dignity or other attributes of men.

      The income tax is fulfilling the Marxist prophecy that the surest way to destroy a capitalist society is by steeply graduated taxes on income and heavy levies upon the estates of people when they die.

[As matters now stand, if our children make the most of their capabilities and training, they will have to give most of it to the tax collector and so become slaves of the government. People cannot pull themselves up by the bootstraps anymore because the tax collector gets the boots and the straps as well.]

The income tax is bad because it is oppressive to all and discriminates particularly against those people who prove themselves most adept at keeping the wheels of business turning and creating maximum employment and a high standard of living for their fellow men.

      I believe that a better way to raise revenue not only can be found but must be found because I am convinced that the present system is leading us right back to the very tyranny from which those, who established this land of freedom, risked their lives, their fortunes and their sacred honor to forever free themselves…

Taxation today is clearly used as a scheme of wealth distribution. In his bid for the presidency in 2008 and again in 2012, Obama talked about increasing taxes on the wealthy. His favorite line was: “We can restore the American dream where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.” He was referring to some sort of “advantage” that those who work hard and earn more money have over those who don’t have much. Even Joe Biden, in 2009, urged the wealthy to pay more in taxes, to “do their patriotic duty.”  And as we see, what President Obama wasn’t willing to do outright (raise taxes on the wealthy) because of political backlash, he did deviously.  Obamacare contains a whole host of new taxes, only a few of which apply to middle-class Americans.

Under what notion of fairness is it OK for people to be relieved in their economic “discomfort” by using the funds that taxpayers have to work 1/3 of the year for and then surrender to the government?  Under what notion of fairness is it OK for people can be relieved in their decisions not to become educated, seek training, or look for work by simply living off the finances that taxpayers have to work 1/3 of the year for and then surrender to the government?  Under what notion of fairness is it OK for people to have lots of children without adequate ability to provide for them while the funds to raise them come from taxpayers who take money from their own families (affecting their own decisions to have more children) and who have to work 1/3 of the year for and then surrender to the government?  President Obama should not surrender the American Dream of one segment of society to serve the dreams of another segment.

IRS Scandal #5 (childrens Tea Party)

Audits for Enemies –

FDR became the first president to practice on a large scale what James Madison called “the spirit of party and faction” and what Justice Stephen Field called the “war of the poor against the rich.” With a steeply progressive income tax in place, Roosevelt used the federal treasury to reward, among others, farmers (who were paid not to plant crops), silver miners (who had the price of their product artificially inflated), and southerners in the vote-rich Tennessee Valley (with dams and cheap electricity).  In the 1936 presidential election, Senator Hiram Johnson (D-CA), a Roosevelt supporter, watched in amazement as the President mobilized “the different agencies of government” to “dole out subsidies for votes.” In other words, he was using government funding to ultimately serve his re-election. Johnson calculated: “He started out with probably 8 million votes bought. The other side will have to buy their votes one by one, and they cannot hope to match his money.” In that campaign, Roosevelt defeated the Republican Alf Landon by an electoral vote of 523–8.

The flip side of rewarding supporters was investigating political opponents. It started with an investigation of Senator Huey Long of Louisiana, who had threatened to run for president against Roosevelt. Next came an audit of William Randolph Hearst, whose newspaper empire strongly opposed Roosevelt for president in 1936. Moses Annenberg, publisher of the Philadelphia Inquirer, criticized the New Deal and vehemently opposed Roosevelt’s re-election campaign in 1936 and ‘coincidently,’ became a target of a full-scale audit the following year (which was followed by a prison term). But perhaps no one was harassed more aggressively than Andrew Mellon, a powerful Republican and former Treasury Secretary. Remember it was Andrew Mellon who fought so hard to reduce the federal income tax rate, both for individuals and corporations.  The Roosevelt administration tasked the IRS and an army of tax inspectors and prosecutors to scrutinize Mellon’s financial records, especially to find out whether deductions for his vast philanthropic activities amounted to tax evasion. Even after IRS agents found nothing irregular, the Justice Department pursued the investigation. Historians have found no documents explaining the Roosevelt administration’s focus on Mellon, but a comment Roosevelt made about him in 1926 may offer a clue: Roosevelt dubbed him “the master mind among the malefactors of great wealth. A federal grand jury declined to indict Mellon for tax fraud in 1934. But the IRS was still pursuing claims against Mellon for at least $3 million in back taxes. Mellon’s “tax trial” before the Board of Tax Appeals in Pittsburgh and Washington lasted 14 months. At a private meeting with Roosevelt during the trial in 1936, Mellon offered to build the National Gallery and endow it with his own collection. Roosevelt accepted the offer, but instructed federal prosecutors to make “no change whatsoever” in the government’s position on the Mellon tax case (according to Mellon biographer David Cannadine). Mellon died the next year, and the suits, including any against his estate, died with him.

The president’s own son, Elliott Roosevelt, conceded in 1975 that “my father may have been the originator of the concept of employing the IRS as a weapon of political retribution.”

President John F. Kennedy  – together with his brother, Robert Kennedy, the Attorney General – used the IRS to go after mobsters and similar types suspected of racketeering for possible tax evasion. But JFK soon expanded the scope of IRS investigation to include political enemies as well. In November 1961, President Kennedy turned to the IRS to challenge the tax-exempt status of “right-wing extremist groups,” as well as fundamentalist Christian ministers who had been openly opposed him for president because of his religion – a Roman Catholic.  In a move not made public at the time, the Kennedy administration established an “Ideological Organizations Audit project” within the IRS, which targeted  conservative groups, such as the John Birch Society. In November, the IRS launched audits of 22 “extremist organizations,” several of which lost their tax-exempt status, jeopardizing their fundraising.

President Richard Nixon used the IRS as his own special gestapo agency. In effect, he re-directed Kennedy’s “Audit Project” to target left-wing groups. After he took office, his administration quickly created a Special Services Staff to mastermind what a memo called “all IRS activities involving ideological, militant, subversive, radical, and similar type organizations.” More than 10,000 individuals and groups were targeted for tax audits because of their political activism or slant between 1969 and 1973, including Nobel Laureate Linus Pauling (a left-wing critic of the Vietnam War) and the far-right John Birch Society. Nixon went after quite a wide range of political “enemy” groups, including anti-war groups (and the churches and other nonprofits that sheltered them), civil rights groups, reporters, and prominent Democrats.

Additionally, the IRS was also given Nixon’s enemies list to, in the words of White House counsel John Dean, “use the available federal machinery to screw our political enemies.” Luckily, as a result of Watergate investigation (1973-4) and, especially, the disclosure of White House tapes, many of these unethical, unauthorized activities became public. The tapes provided a direct line of accountability from the IRS to the Oval Office that was often missing in previous administrations. They provide unambiguous evidence that Nixon used his power to direct aides to use the IRS to get back at political enemies. In a taped conversation on Sept. 8, 1971, Nixon told his chief domestic policy adviser, John Ehrlichman, to direct the IRS to audit potential Democratic rivals, including Sens. Hubert Humphrey of Minnesota, Edward Kennedy of Massachusetts, and Edmund Muskie of Maine.  “Are we going after their tax returns? I … you know what I mean? There’s a lot of gold in them thar hills,” Nixon said.

Article 2 of the Articles of Impeachment brought against President Nixon in 1974 charged him with “acting personally and through his subordinates and agents, to endeavor to obtain from the Internal Revenue Service, in violation of the constitutional rights of citizens, confidential information contained in income tax returns for purposes not authorized by law, and to cause, in violation of the constitutional rights of citizens, income tax audits or other income tax investigation to be initiated or conducted in a discriminatory manner.”

Bill Clinton liked to deny that he would ever use the IRS to target political and personal enemies. Yet the audits speak for themselves..  The list of women, and other persons who faced tax audits – some immediately after going public with their accusations of sexual harassment or rape (Paula Jones and Juanita Broaddrick), who alleged sexual affairs (Gennifer Flowers and Liz Ward Gracen), or who agreed to offer testimony in such cases (such as Linda Tripp), as well as persons involved with the Whitewater scandal – suggests a pattern of political retaliation.  Even Bill O’Reilly was audited three times by the Clinton administration and the watchdog group, Judicial Watch, was audited as well.  It was no wonder the IRS targeted Judicial Watch. The organization alone filed more than 50 lawsuits against the Clinton administration for improper targeting of individuals by the IRS, in violation of privacy rights and IRS policy. In a meeting with Judicial Watch officials in January 12, 1999 to discuss the audits, an IRS agent boldly stated: “What do you expect when you sue the President?”

Under Clinton, the IRS was notoriously used as a tool to harass and intimidate.  As was done by the administrations before him, the IRS was tasked with auditing a wide range of organizations that were viewed as hostile to the White House agenda. These included leading conservative publications, think tanks, and interest groups, among them The American Spectator, the National Review, the Heritage Foundation, the National Rifle Association, the National Center for Public Policy Research, the American Policy Center, American Cause, Citizens for Honest Government, Citizens Against Government Waste, Progress and Freedom Foundation, Landmark Legal Foundation, and Concerned Women for America.

IRS official Paul Breslan knew exactly what the organization was doing. And a memo was used to tie Clinton himself to the audits. In the memo, White House Associate Counsel William Kennedy is documented as saying that the IRS is “on top of it.”  In a speech on the House floor in 1996, Rep. John Mica (R-FL) said: “The fact is, the White House in this case misused the IRS and the FBI in an incredible abuse of power.”  During the Clinton years, conservatives used to joke back that if Clinton didn’t have the IRS audit you, then you weren’t a real conservative.

And now we see that the Obama administration has used the IRS to single out and target Tea Party, patriot groups, and other conservative organizations in their applications for tax-exempt status.  According to a House probe, for the past 18 months (although it is likely the abuse has gone back as far as 2010), the IRS used “inappropriate criteria” – that is, focusing on groups with conservative-sounding words or phrases in their name, such as “Tea Party,” or “patriot – for scrutiny in their tax-exemption applications. As if that wasn’t bad enough, IRS agents also misappropriated the information contained in the confidential tax returns of conservative organizations and donors to GOP candidates (such as Mitt Romney) and leaked it to political enemies, in violation of federal law.

IRS - Internal Revenge Service

Conclusion –

Glenn Beck summarized the Tax Code and the IRS rather well a few years ago: “The tax code is not meant to be read and understood by the people. It’s meant as a shelter for those who’ve taken power from us, and a weapon of selective enforcement to be used against any who would dare to raise an opposing voice. The law is not for them; it’s for you.” I guess what we are seeing right now is this explanation being exposed for the truth that it offers.  Beck continued: “Right now, at least a hundred thousand federal employees together owe a billion dollars in back taxes, and the Treasury Secretary, Timothy Geithner, himself is one of them. There is no reason why the person who runs the IRS, the congressmen who writes our tax code, including repeat tax cheat Charlie Rengal, or the CEO who has friends in the White House, should get a free pass when you and I must pay taxes and pay the consequences of our decisions not to do so.”

John Adams once said: “We are a government of laws, not men.”  Somewhere along the way, we’ve lost this fundamental truth.

Also, somewhere along the way, the government has gotten off track in its goal of enlarging its powers and responsibilities. Of course, government couldn’t grow without the financial resources to do so. First it created the Federal Reserve to print the money and provide the loans it needed and then came the unlimited ability to tax citizens.  There is a fine line between taxation and plunder. What isn’t such a fine line is that which is constitutional and what is unconstitutional. The Founders wrote our Constitution for the common man to understand.  The average citizen was meant to read the Constitution and easily understand the bounds of government and its extent in his life. Again, transparency and simplicity are what is expected in a free society. Our Founders never expected the Constitution to be interpreted according to the whims and views of nine justices who too often have rejected the principles on which the nation was founded and have lost the ability “to see the forest for the trees” (meaning, they’ve lost the ability to see the most relevant points because they’re too busy focusing on smaller issues that take their eye off the big picture). The pressure of necessity (the need for government to take control of matters) has often clouded their view of what government was instituted for.

Our government is bloated because it is funding too projects not authorized by the Constitution. In addition to its constitutional responsibilities, Congress is taxing for unconstitutional purposes as well. State grants (to coerce financially what it can’t require constitutionally) is an example. And this brings us to the current state of taxation, which amounts to plunder – legal plunder.

Frederic Bestiat (1801-1850), the French economist who championed private property, free markets, and limited government, defined legal plunder: “Legal plunder can be committed in an infinite number of ways.  We have an infinite number of plans for organizing it: tariffs, protection, benefits, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole – with their common aim of legal plunder – constitute socialism.” 

We know our federal government was able to sell its plan of progressive income taxation – its plan of legal plunder – on its promise to “soak the wealthy.” After all, who doesn’t look at the very wealthy and conclude that they have more than enough and that they won’t miss millions of their dollars. The current administration continues to sell this plan as a “patriotic duty” and a “fairness” thing.  Bestiat explained why legalized plunder is such an attractive plan by explaining the human nature behind its mentality: “Now since man is naturally inclined to avoid pain – and since labor is pain in itself – it follows that men will resort to plunder whenever plunder is easier than work. History shows this quite clearly. And under these conditions, neither religion nor morality can stop it….   It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.”

Socialism recognizes that there are some people who, by their human nature and ability to develop their gifts, will be producers and there are those who will reject the opportunities to invest in themselves  and resist the need to become producers. And so, for the common good comes the policy that states: “From each according to his ability, to each according to his need.”  (the slogan popularized by Karl Marx in his 1875 Critique of the Gotha Program). In other words, only in the situation where the government organizes and arranges for the abundance of goods and services will there be enough to satisfy everyone’s needs. That’s the Marxist view.  But this is the United States. We don’t think like that. That’s not in the lifeblood that courses through our veins. We are not Russia or Germany or any other nation that looks at people only in the collective sense. People are individuals first, with individual God-given rights to be individuals.

Bestiat warned those who value freedom to be ever vigilante for legislation that “takes from some persons what belongs to them and gives it to other persons to whom it does not belong… That benefits one citizen at the expense of another by giving to that person what he has the ability to provide for himself.” He explains how essential it is that such legislation be rooted out.  “The tool of socialists is legal plunder. To prevent this, you must exclude socialism from entering into the making of laws. You must prevent socialists from entering the Legislative Palace.  If you do not succeed, legal plunder will continue to be the main business of the legislature…. Socialism is the state whereby everyone tries to live at the expense of everyone else. When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”

That’s why the time has come for the legalized plunder to stop and for the innovative, liberty-minded people of the United States to come up with a viable solution for government revenue that doesn’t imperil individual freedom and prosperity.  The Fair Tax – a national consumption tax – is one such plan.

As it is so true about history, the past holds the answers to the future. That’s why we have the saying: “Those who fail to learn from history are doomed to repeat it.”  Frederic Bestiat (1801-1850), who, like our Founders, saw the wisdom and inherent freedom in a government that was: (i) designed primarily to protect the lives, liberty, and private property of citizens from theft or aggression and the designs of evil-intentioned individuals (and from government itself) and (ii) sufficiently limited in its ability to coerce the People in their exercise of freedom as well as in their economic pursuits, wrote that men will naturally rebel against an injustice when they find that they have sufficiently become its victims. It is also human nature, he explained. This was the case of the Boston Tea Party, various other displays of civil disobedience, and eventually, the American Revolution itself.  (He also suggested a second course – instead of a rebellion against the plunder, men will capitulate on a large scale, refuse to work, invent, educate, etc and demand government provide for everyone).

Bestiat wrote that burdensome government restrictions, legalized plunder, indentured servitude, and slavery find defenders only among those who profit from them. Unfortunately, as almost 100 years of American history has shown, defenders will also be found among those who suffer from them. The question is whether the time has come for another simple act of civil disobedience — the petition and protest of honest, hard-working Americans against our current unfair system of taxation.

“In our time, many seem to think ‘the Declaration’ was penned to proclaim eternal verities about the human condition — a poetic tribute to ‘life, liberty and the pursuit of happiness’ — as if it were a collection of fine words about high-minded ideals. No!  It was a rebellion against bad governance, against political arrogance, against oppressive laws, against restriction, constraint, and imposition without representation.” (Scott Ott, of PJ Media) We call it ‘The Declaration,’ as if it merely declares our moral purpose.  But that’s not the object. Its purpose is to provide the blueprint for true and everlasting human liberty… for true ‘Independence.’  ”The members of the Second Continental Congress did not expect to forfeit their lives, fortunes, and sacred honor for stating the obvious about the ‘laws of nature and of nature’s God.’  Their necks ripened for the noose because they altered, abolished, and threw off the yoke of their government.” (Ott)  They desired to be absolved of any allegiance to a government that did not respect their rights.  They counted all as loss to obtain freedom; to be absolved of allegiance to their government, to dissolve all political connections between themselves and the state which they had always referred to as their own.

The Declaration of Independence offers a daily reminder of the exhaustive reasons for holding government accountable and rejecting it when it becomes corrupt, abusive, and oppressive…   to preserve Liberty.

The Declaration would clearly instruct us to move (peacefully) to abolish the federal income tax and to do away with the IRS.

IRS Scandal #2

 

RESOLUTION TO ABOLISH THE INCOME TAX and THE IRS

T. Coleman Andrews served as commissioner of IRS for nearly 3 years during the early 1950s. Following his resignation, he made the following statement:

“Congress, in implementing the Sixteenth Amendment, went beyond merely enacting an income tax law and repealed Article IV of the Bill of Rights, by empowering the tax collector to do the very things from which that article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of government agents and set the stage for searches of our books and vaults and for inquiries into our private affairs whenever the tax men might decide, even though there might not be any justification beyond mere cynical suspicion.

      The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember that under the Sixteenth Amendment, Congress can take 100% of our income anytime it wants to. As a matter of fact, right now it is imposing a tax as high as 91%. This is downright confiscation and cannot be defended on any other grounds 

      The income tax is bad because it was conceived in class hatred, is an instrument of vengeance and plays right into the hands of the communists. It employs the vicious communist principle of taking from each according to his accumulation of the fruits of his labor and giving to others according to their needs, regardless of whether those needs are the result of indolence or lack of pride, self-respect, personal dignity or other attributes of men 

      The income tax is fulfilling the Marxist prophecy that the surest way to destroy a capitalist society is by steeply graduated taxes on income and heavy levies upon the estates of people when they die.

[As matters now stand, if our children make the most of their capabilities and training, they will have to give most of it to the tax collector and so become slaves of the government. People cannot pull themselves up by the bootstraps anymore because the tax collector gets the boots and the straps as well.]

The income tax is bad because it is oppressive to all and discriminates particularly against those people who prove themselves most adept at keeping the wheels of business turning and creating maximum employment and a high standard of living for their fellow men.

      I believe that a better way to raise revenue not only can be found but must be found because I am convinced that the present system is leading us right back to the very tyranny from which those, who established this land of freedom, risked their lives, their fortunes and their sacred honor to forever free themselves…”

The progressive income tax was imposed on the American people in 1913 following the ratification of the Sixteenth Amendment, which states: “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.” It was never intended to be a primary source of funding for government. It was merely intended to make up for revenue losses from tariffs, which were the primary source of funding for the constitutional.

Whereas, the current U.S. tax system is huge convoluted mess. The Internal Revenue Service (IRS) has six federal income tax brackets ranging from 10% to 35%, depending on “income.” This progressive tax system punishes the most productive members of society with a higher tax rate yet turns around and gives a tax credit to lower income earners that often amounts to a tax refund larger than the amount of tax paid in through withholding. The current tax system is riddled with loopholes and biases that hurt individuals who save money for the future. Not only does our tax code treat citizens differently but it is so hopelessly complicated that it frightens most taxpayers. It is far too complex, intrusive, and long; and

Whereas, once government undertakes to tax income, it acquires even more power through its authority to define “income,” “taxable income,” subsidiary terms, and the rules of exemption. The potential for abuse, capriciousness (arbitrary treatment), harassment, and corruption is great; and

Whereas, there is credible evidence to show that there were significant ratification discrepancies which call into question the legality of the Sixteenth Amendment; the evidence supports the conclusion that the Sixteenth Amendment was not properly and legally ratified by 3/4 of the states of the Union in 1913, as per Article V of the US Constitution; and

Whereas, the progressive income tax has become an instrument of government plunder of American income and property, in total disregard of our founding principle which states that property is as essential to a free man as his Life and Liberty. Rather, a heavy progressive income tax (as we have) is the second plank of the Communist Manifesto, written by Karl Marx and Friedrich Engels in 1948; and

Whereas, the current tax code is 73,954 pages of legalese (over 3 million words; taller than a giraffe and weighs 145 pounds), which the ordinary person living in the United States has no time to read or is capable of understanding, and it continues to grow and become more convoluted. (To emphasize this point, consider this: the average person can read 250 words per minute.  Assuming the average reader took no breaks, it would take 15,200 minutes, 253 hours, or 10.5 days (without a single break) to read the tax code. Ayn Rand’s famous book Atlas Shrugged has 645,000 words.  The tax code has 5.9 times that amount); and

Whereas, the progressive income tax scheme (the Tax Code) imposes a heavy burden on all American taxpayers, with respect to both money and time. Saving and collecting records and receipts is time-consuming, a hassle, and a big headache. According to the IRS, the average taxpayer spends 26.5 hours preparing and sending in their taxes. Just complying with our voluminous and complicated federal tax system costs Americans about $431 billion a year, according to economist Arthur Laffer (although other estimates go as high as $600 billion). American taxpaying families often have to hire a CPA. Furthermore, another $1000 to $2000 in embedded costs are passed on to the average consumer each year by businesses who have to add the cost of tax compliance to their “cost of doing business” and therefore to the cost of their products and services (for every dollar sent to the IRS, it costs 30 cents in compliance); and

Whereas, the progressive income tax allows the federal government to pry into the private records, private accounts, private business, and personal affairs of individual citizens in order to find out what income and property it considers to be “taxable income”; and

Whereas, with the IRS able to look at the financial records of Americans, it gives the government power to make decisions as to when certain citizens “have enough already,” and then wage war on their “excess”; an

Whereas, the average working American, poor, rich, or in-between, hates, and fears the IRS for good reason. It is able to seize one’s bank account or house without a court order, able to shut down one’s business overnight, and subject one to fines for failure to report income correctly, even when it is done innocently. In the eyes of the average American taxpayer, the tax code is unfair, overly complex, arbitrary in its requirements and exemptions, horribly politicized, harmful to individuals and the economy, helpful to the forces of Big Government, and impossible to understand without a CPA; and

Whereas, the harmful effects of the income tax are obvious. First and foremost, it has enabled government to expand far beyond its proper constitutional limits, regulating virtually every aspect of our lives. It has given government a claim on our lives and work, has created class warfare (taxpayers v. non-taxpayers), and it has destroying our privacy in the process. It takes billions of dollars out of the legitimate private economy, with most Americans giving more than a third of everything they make to the federal government. This economic drain destroys jobs and penalizes productive behavior. It has created class warfare (taxpayers v. non-taxpayers; producers v. non-producers; contributors v. takers) and in many cases, it has destroyed the incentive to work, to become more successful, and to accumulate wealth and property. The ridiculous complexity of the tax laws makes compliance a nightmare for both individuals and businesses. All things considered, our Founders would be dismayed by the income tax mess and the tragic loss of liberty which has resulted; and

Whereas, the progressive income tax is inherently corruptible and subject to arbitrary rules and application. The tendency is for government to create exemptions in return for political favors or to coerce a political agenda. The language providing guidelines for such exemptions is invariably vague, which means the IRS has room to “interpret” and decide who qualifies and who doesn’t qualify for a particular exemption. The line between vigilance and harassment is not bright and the potential for abuse is great. This power, which is inherently arbitrary, ill suits a society that sees itself as free.  Furthermore, where possible, people will naturally strive for tax exemption and will push the boundaries of tax guidelines. Such a tax scheme, therefore, encourages dishonesty and corruption; and

Whereas, the progressive income tax relieves some people from a shared responsibility to contribute to a government that serves them. Philosophically, no person or business should be exempt from a general taxation scheme. The current tax code imposes a tax burden on approximately half the US population while half are excused or exempted. The common government protects everyone equally (except under the taxation scheme) yet serves some more extensively than others. The tax code is progressive in tax burden but not progressive in services/benefits enjoyed.  The current tax scheme – the progressive income tax created by the 16th Amendment – should be replaced by a Fair Tax (a national sales tax of about 23%) so that every American does his patriotic duty, has skin in the game, and has an interest in fiscal responsibility by their government. At the very least, the progressive income tax should be replaced by a low, flat-rate income tax (Flat Tax), 10% or lower, to be applied to all wage earners; and

Whereas, the federal income tax has become a wealth distribution scheme. Taxes that are soaked from the middle and upper classes are used to fund social programs that they are not entitled to and which go towards relieving a huge segment of society of their lower economic status.  The object of federal taxation was not to leave men with equal incomes after they’ve been taxed”; and

Whereas, the IRS puts the government tax collector in a position of extraordinary power over fellow citizens (the “gorilla” role); he has the power to intimidate citizens who are unlucky enough to be audited by making them feel that they somehow “cheated” the government (rather than the most likely scenario – that they are merely “victims” of an unfair system); and

Whereas, the IRS often finds it difficult to avoid the attitude that each taxpayer is a cheat, even a criminal, who must somehow be cornered and caught. This has brought the nature of the entire income tax collection process into question; and

Whereas, thousands of complaints have poured into the IRS concerning the tactics used by some of its agents. Citizens feel they are treated as criminals rather than suspects who are innocent until proven guilty; and

Whereas, the IRS has been guilty of many transgressions and has cost the American taxpayers billions of dollars. For example, one of the things the IRS is well known for is giving incarcerated criminals who prepare fraudulent returns tens of millions of dollars in refunds they’re not entitled to. The figure actually increases annually, which means the IRS continues to do so. According to a federal audit, the latest count is that the IRS has doled out more than $35 million to criminals. A few years ago the IRS came under fire for allowing 1 million foreigners, many in the U.S. illegally, to improperly claim close to $9 billion in tax credits even though they did not provide valid Social Security numbers on their return.  Not long after that, the tax agency got in trouble for handing out $33 million in bogus electric car credits. As recently as April 2013, two dozen IRS employees were charged with stealing hundreds of thousands of dollars in government benefits, including food stamps, welfare and housing vouchers. The scheme fleeced U.S. taxpayers out of at least a quarter of a million dollars, according to federal prosecutors; and

Whereas, the IRS chills the First Amendment rights of churches and nonprofit organizations which now hesitate to use them for fear of losing tax-exempt status; and

Whereas, the most damaging aspect of the Sixteenth Amendment is the fact that it violates the unalienable rights provided in the 4th Amendment. This is the amendment which protects privacy–privacy of the home, business, personal papers and personal affairs of the private citizen. None of these are disturbed by a poll (head or capitation) tax because it is so much per person regardless of the circumstances, but when the tax is based on income, the IRS is assigned the most unpleasant task of making certain that everyone pays his fair share. This task is physically impossible without prying into the private papers, private business and personal affairs of the individual citizens. By any standard, it is a miserable assignment. Furthermore, it is impossible to run audits and surveys of all taxpayers and so the audits seldom check more than 2% of them;  and

Whereas, the Internal Revenue Service (IRS) is the closest thing to the Gestapo that the United States has ever had; administrations have used its awesome power to audit tax returns as an effective means to silence and intimidate political opponents; and

Whereas, the IRS has gotten out of control:

– The IRS has admitted to intentionally and deliberately targeting conservative groups (especially those containing the terms “Tea Party” or “patriot” in their names) since at least 2011. In some cases, conservative individuals have been targeted. The targeting was done with malicious intent;

– The IRS has admitted that it has deliberately harassed said conservative political organizations claiming tax exempt status by singling them out for additional scrutiny and investigation;

–  Lois Lerner, who heads the IRS division that oversees tax exempt groups, has admitted that at least 75 organizations were singled out because they included the words “Tea Party” or “patriot” in their applications for tax exempt status. She acknowledged that actions were clearly violations of IRS policies;

–  The IRS’ inappropriate and intimidating investigation tactics included probing questions about organizations’ board members, officers, employees, and their families. There were also demands for extraordinary detail on employee training, vending, and advertising. Among other IRS demands, they required lists of “all issues important to your organization” with requests to “indicate your position regarding each issue”;

–  The IRS intentionally and maliciously leaked confidential taxpayer information of said conservative groups to Leftist allies;

–  The IRS has admitted that it engaged in political profiling while processing applications for tax-exempt status. It searched tax applications for words like “Tea Party” and even “patriot.” Once it found those groups, it made intrusive and unconstitutional inquiries, demanding answers “upon penalty of perjury.”  [In this case it was against organizations with “tea-party” or “patriot ” in their names and other right-wing groups. Next time it could be libertarian or left-wing antiwar and pro-civil-liberties groups. No dissenter can ever rest assured he is safe from the arbitrary power of the IRS];

–  The IRS targeted conservative groups in swing states before the 2012 election. The chilling effect on such organizations because of said targeting together with alleged instances of voter fraud (showing higher than expected voter turn-out for Democrats) in the same areas calls into question the results of the election;

–  This ongoing IRS abuse continues today, as the ACLJ represents dozens of these targeted groups;

– IRS officials threw lavish parties for themselves, spending millions of dollars even as Americans struggled to keep their jobs and pay their taxes;

– Pro-life and Christian groups report extreme and intrusive demands, including one reported demand that a pro-life group promise not to picket Planned Parenthood. The intent was to chill and even shut down their First Amendment rights of free speech expression and of conscience;

– The IRS conducted mass-scale audits of adoptive families, auditing 100,000 in 2011 alone – simply because they adopted a child.

In consideration of all of the above, the ________________________  (group name) concludes that –

Taxation, other than sales tax (which is tied to contract law and includes an element of consent), is nothing less than confiscation under threat of force of the property and/or income of individuals. Progressive taxation is government plunder of the wealthy, offensive to our notions of equal treatment and equal protection under the law; and

The progressive income tax is the targeted confiscation of the fruits earned by creative, industrious, and productive individuals; it punishes success, productivity, creativity, ingenuity, hard work, investment, and risk-taking and is inconsistent with a nation committed to the freedom to “pursue happiness;  and

The progressive income tax has no place in a free society. It amounts to the plunder of property and the frustrates the Pursuit of Happiness;

Elimination of an income tax will do more than anything else to return political and government power from Washington DC back to the People; and

The IRS targeting of political opponents represents some of the most shameful abuses of government power in 20th century American history. A government organization like the IRS discriminating against political organizations is an outrageous abuse of power, and the American people have every right to demand answers and accountability; and

As recent testimony has made clear, the IRS is institutionally incapable of governing itself (let alone that it has no constitutional authority) and departments such as the legislative and executive branches are incapable of managing it, providing oversight, or providing transparency to the American people in its regard; and

The Internal Revenue Service cannot be used as a weapon against political enemies. There must be a thorough investigation of IRS abuse (as well as abuse at the hands of other government agencies), and those responsible must be punished. There is no excuse for turning the full power of the IRS – and the federal government in general – on American citizens; and

Use of the IRS as a harassment, intimidation, and bullying arm of the President’s administration has set a dangerous precedent (we’ve also seen it use Homeland Security for the same purpose); and

The IRS has successfully chilled the fundamental rights that Americans are entitled to under the US Constitution (and specifically, the Bill of Rights); and

When government goes after political opponents, that is the very definition of tyranny; and

Americans have a rightful expectation to have trust in their government. Trust in government is a hallmark of a free society.  The current IRS scandal has destroyed that trust; and

Because trust in government has been destroyed and because it appears that the IRS has become a Gestapo agency, the American people cannot be expected to allow it  to be the enforcement arm of Obamacare – the healthcare program the government has forced them to comply with; and

Therefore, be it –

Resolved, that the American people can no longer trust the IRS to enforce Obamacare, apply tax laws fairly, evenly, and without bias, and to be respectful of the information shared in healthcare records, tax records, and even private, personal information to be mined through Common Core; and

Resolved, that the  progressive federal income tax has become arbitrary, unfair, overly convoluted, and an exercise of government plunder, and the IRS has become an agency used by government for the improper scrutiny of American citizens; and

 Resolved, that the ________________________  (group name) believes the time has come to reform the tax code and by extension, abolish the Internal Revenue Service.

 

References:

The US Constitution

The Fair Tax –  http://www.fairtax.org

Congressional Record-House, July 12, 1909, p.4404

Congressional Record-House, July 12, 1909, p.439

Pollock v. Farmers Loan & Trust Company, 157 U.S. 429 (1895)

Federalist No. 10.  http://www.constitution.org/fed/federa10.htm

“The Income Tax Arrives,” Tax History.  http://www.taxhistory.org/www/website.nsf/Web/THM1901

“How Some States Did Not Legally Ratify the Sixteenth Amendment”  –http://www.givemeliberty.org/features/taxes/notratified.htm

Jack Kenny and John Larabell, “100 Years Ago: Instituting the Income Tax,” The New American, February 4, 2013.  Referenced at:  http://www.thenewamerican.com/culture/history/item/14410-100-years-ago-instituting-the-income-tax

Sheldon D. Pollack, “Origins of the Modern Income Tax,” Tax Lawyer Winter, Vol. 66, No. 2, Winter 2013.  (Very detailed history of the Modern Income Tax).   Referenced at:  https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CFsQFjAC&url=http%3A%2F%2Fwww.buec.udel.edu%2Fpollacks%2FDownloaded%2520SDP%2520articles%2C%2520etc%2Facademic%2520articles%2FOrigins%2520of%2520the%2520Modern%2520Income%2520Tax%2520in%2520Tax%2520Lawyer%2520Winter%25202013.pdf&ei=-67IUZLPM9On4AOuoYDAAg&usg=AFQjCNELWbU-x8YvwgSiReYZAXs18HA36A&sig2=znteVrEa3AsercrlR6YVCA

W. Cleon Skousen, “History of the 16th Amendment,” Latter Day Conservative.  Referenced at: http://www.latterdayconservative.com/articles/history-of-the-16th-amendment/

Burton Fulsom, “The Progressive Income Tax in US History,” The Freeman, May 1, 2003.  Referenced at: http://www.fee.org/the_freeman/detail/the-progressive-income-tax-in-us-history

“History of Federal Individual Income Bottom and Top Bracket Rates,” National Taxpayers Union.  Referenced at:  http://www.ntu.org/tax-basics/history-of-federal-individual-1.html

Diane Schrader, “The Top 7 Reasons (and One Promising Way) to Abolish the IRS For Good,” News Real Blog, February 2, 2011.  Referenced at: http://www.newsrealblog.com/2011/02/02/the-top-7-reasons-and-one-promising-way-to-abolish-the-irs-for-good-1/ 

Frederic Bestiat (1801-1850) –  http://mises.org/page/1447/Biography-of-Frederic-Bastiat-18011850

“Policy Basics: Where Do Our Federal Tax Dollars Go?,” Center on Budget and Policy Priorities, March 12, 2013.  Referenced at:  http://www.cbpp.org/cms/?fa=view&id=1258

Gail Russell Chaddock, “Playing the IRS Card: Six Presidents Who Used the IRS to Bash Political Foes,”The Christian Science Monitor, May 17, 2013.  Referenced at:  http://www.csmonitor.com/USA/DC-Decoder/2013/0517/Playing-the-IRS-card-Six-presidents-who-used-the-IRS-to-bash-political-foes/President-John-Kennedy-D

“IRS Conservative Witch Hunt is Just Latest of Many Offenses,” Judicial Watch, May 17, 2013.  Referenced at:  http://www.judicialwatch.org/blog/2013/05/irs-conservative-witch-hunt-just-latest-of-many-offenses/

 

APPENDIX:

I.   HOW SOME STATES DID NOT LEGALLY RATIFY THE 16TH AMENDMENT

http://www.givemeliberty.org/features/taxes/notratified.htm

Bill Benson’s findings, published in “The Law That Never Was,” make a convincing case that the 16th amendment was not legally ratified and that Secretary of State Philander Knox was not merely in error, but committed fraud when he declared it ratified in February 1913. What follows is a summary of some of the major findings for many of the states, showing that their ratifications were not legal and should not have been counted.

The 16th amendment had been sent out in 1909 to the state governors for ratification by the state legislatures after having been passed by Congress. There were 48 states at that time, and three-fourths, or 36, of them were required to give their approval in order for it to be ratified. The process took almost the whole term of the Taft administration, from 1909 to 1913.

Secretary Knox had received responses from 42 states when he declared the 16th amendment ratified on February 25, 1913, just a few days before leaving office to make way for the administration of Woodrow Wilson. Knox acknowledged that four of those states (Utah, Conn, R.I. and N.H.) had rejected it, and he counted 38 states as having approved it. We will now examine some of the key evidence Bill Benson found regarding the approval of the amendment in many of those states.

In Kentucky, the legislature acted on the amendment without even having received it from the governor (the governor of each state was to transmit the proposed amendment to the state legislature). The version of the amendment that the Kentucky legislature made up and acted upon omitted the words “on income” from the text, so they weren’t even voting on an income tax! When they straightened that out (with the help of the governor), the Kentucky senate rejected the amendment. Yet Philander Knox counted Kentucky as approving it!

In Oklahoma, the legislature changed the wording of the amendment so that its meaning was virtually the opposite of what was intended by Congress, and this was the version they sent back to Knox. Yet Knox counted Oklahoma as approving it, despite a memo from his chief legal counsel, Reuben Clark, that states were not allowed to change it in any way.

Attorneys who have studied the subject have agreed that Kentucky and Oklahoma should not have been counted as approvals by Philander Knox, and, moreover, if any state could be shown to have violated its own state constitution or laws in its approval process, then that state’s approval would have to be thrown out. That gets us past the “presumptive conclusion” argument, which says that the actions of an executive official cannot be judged by a court, and admits that Knox could be wrong.

If we subtract Kentucky and Oklahoma from the 38 approvals above, the count of valid approvals falls to 36, the exact number needed for ratification. If any more states can be shown to have had invalid approvals, the 16th amendment must be regarded as null and void.

The state constitution of Tennessee prohibited the state legislature from acting on any proposed amendment to the U.S. Constitution sent by Congress until after the next election of state legislators. The intent, of course, is to give the proposed amendment a chance to become an issue in the state legislative elections so that the people can have a voice in determining the outcome. It also provides a cooling off period to reduce the tendency to approve an idea just because it happens to be the moment’s trend. You’ve probably already guessed that the Tennessee legislature did not hold off on voting for the amendment until after the next election, and you’d be right – they didn’t; hence, they acted upon it illegally before they were authorized to do so. They also violated their own state constitution by failing to read the resolution on three different days as prescribed by Article II, Section 18. These state constitutional violations make their approval of the amendment null and void. Their approval is and was invalid, and it brings the number of approving states down to 35, one less than required for ratification.

Texas and Louisiana violated provisions in their state constitutions prohibiting the legislatures from empowering the federal government with any additional taxing authority. Now the number is down to 33.

Twelve other states, besides Tennessee, violated provisions in their constitutions requiring that a bill be read on three different days before voting on it. This is not a trivial requirement. It allows for a cooling off period; it enables members who may be absent one day to be present on another; it allows for a better familiarity with, and understanding of, the measure under consideration, since some members may not always read a bill or resolution before voting on it (believe it or not!). States violating this procedure were: Mississippi, Ohio, Arkansas, Minnesota, New Mexico, West Virginia, Indiana, Nevada, North Carolina, North Dakota, Colorado, and Illinois. Now the number is reduced to 21 states legally ratifying the amendment.

When Secretary Knox transmitted the proposed amendment to the states, official certified and sealed copies were sent. Likewise, when state results were returned to Knox, it was required that the documents, including the resolution that was actually approved, be properly certified, signed, and sealed by the appropriate official(s). This is no more than any ordinary citizen has to do in filing any legal document, so that it’s authenticity is assured; otherwise it is not acceptable and is meaningless. How much more important it is to authenticate a constitutional amendment! Yet a number of states did not do this, returning uncertified, unsigned, and/or unsealed copies, and did not rectify their negligence even after being reminded and warned by Knox. The most egregious offenders were Ohio, California, Arkansas, Mississippi, and Minnesota – which did not send any copy at all, so Knox could not have known what they even voted on! Since four of these states were already disqualified above, California is now subtracted from the list of valid approvals, reducing it to 20.

These last five states, along with Kentucky and Oklahoma, have particularly strong implications with regard to the fraud charge against Knox, in that he cannot be excused for not knowing they shouldn’t have been counted. Why was he in such a hurry? Why did he not demand that they send proper documentation? They never did.

Further review would make the list dwindle down much more, but with the number down to 20, sixteen fewer than required, this is a suitable place to rest, without getting into the matter of several states whose constitutions limited the taxing authority of their legislatures, which could not give to the federal govern authority they did not have.

The results from the six states Knox had not heard from at the time he made his proclamation do not affect the conclusion that the amendment was not legally ratified. Of those six: two (Virginia and Pennsylvania) he never did hear from, because they ignored the proposed amendment; Florida rejected it; two others (Vermont and Massachusetts) had rejected it much earlier by recorded votes, but, strangely, submitted to the Secretary within a few days of his ratification proclamation that they had passed it (without recorded votes); West Virginia had purportedly approved it at the end of January 1913, but its notification had not yet been received (remember that West Virginia had violated its own constitution, as noted above).

THERE IS NO LAW REQUIRING ORDINARY AMERICAN EMPLOYEES TO PAY FEDERAL INCOME TAX !! –  http://www.youtube.com/watch?feature=player_embedded&v=1UCcW0RoNdc#at=282

***  Bill Benson wrote a book in 1985 – The Law That Never Was.  Summary:  The authority of the federal government to collect its income tax depends upon the 16th Amendment to the U.S. Constitution, the federal income tax amendment, which was allegedly ratified in 1913. After a year of extensive research, Bill Benson discovered that the 16th Amendment was not ratified by the required 3/4 of the states, but nevertheless Secretary of State Philander Knox fraudulently announced ratification.

Article V of the U.S. Constitution defines the ratification process and requires three-fourths of the states to ratify any amendment proposed by Congress. There were forty-eight states in the American Union in 1913, meaning that affirmative action of thirty-six was necessary for ratification. In February 1913, Secretary of State Philander Knox proclaimed that thirty-eight had ratified the Amendment.

In 1984 Bill Benson began a research project, never before performed, to investigate the process of ratification of the 16th Amendment. After traveling to the capitols of the New England states and reviewing the journals of the state legislative bodies, he saw that many states had not ratified. He continued his research at the National Archives in Washington, D.C.; it was here that Bill found his Golden Key.

This damning piece of evidence is a sixteen-page memorandum from the Solicitor of the Department of State, among whose duties is the provision of legal opinions for the Secretary of State. In this memorandum, the Solicitor lists the many errors he found in the ratification process.

These four states are among the thirty-eight from which Philander Knox claimed ratification:

  • California: The legislature never recorded any vote on any proposal to adopt the amendment proposed by Congress.
  • Kentucky: The Senate voted on the resolution, but rejected it by a vote of nine in favor and twenty-two opposed.
  • Minnesota: The State sent nothing to the Secretary of State in Washington.
  • Oklahoma: The Senate amended the language of the 16th Amendment to have a precisely opposite meaning.

When his project was finished at the end of 1984, Bill had visited the capitol of every state from 1913 and knew that not a single one had actually and legally ratified the proposal to amend the U.S. Constitution. Thirty-three states engaged in the unauthorized activity of altering the language of an amendment proposed by Congress, a power that the states do not possess.

Since thirty-six states were needed for ratification, the failure of thirteen to ratify was fatal to the Amendment. This occurs within the major (first three) defects tabulated in Defects in Ratification of the 16th Amendment. Even if we were to ignore defects of spelling, capitalization and punctuation, we would still have only two states which successfully ratified.

 

II.     Historical Income Tax Rates & Brackets

   

Tax Rates

 

Bottom bracket

Top bracket

Calendar Year

President

Rate
(percent)

Taxable Income Up to

Rate
(percent)

Taxable
Income over

1913-15

Woodrow Wilson

1 20,000 7 500,000
1916

Woodrow Wilson

2 20,000 15 2,000,000
1917

Woodrow Wilson

2 2,000 67 2,000,000
1918

Woodrow Wilson

6 4,000 77 1,000,000
1919-20

Woodrow Wilson

4 4,000 73 1,000,000
1921

Warren Harding

4 4,000 73 1,000,000
1922

Warren Harding

4 4,000 56 200,000
1923

Warren Harding

3 4,000 56 200,000
1924

Calvin Coolidge

1.5 4,000 46 500,000
1925-28

Calvin Coolidge

1? 4,000 25 100,000
1929

Herbert Hoover

4? 4,000 24 100,000
1930-31

Herbert Hoover

1? 4,000 25 100,000
1932-33

Hoover, then FDR

4 4,000 63 1,000,000
1934-35

Franklin D. Roosevelt

4 4,000 63 1,000,000
1936-39

Franklin D. Roosevelt

4 4,000 79 5,000,000
1940

Franklin D. Roosevelt

4.4 4,000 81.1 5,000,000
1941

Franklin D. Roosevelt

10 2,000 81 5,000,000
1942-434

Franklin D. Roosevelt

19 2,000 88 200,000
1944-45

FDR, then Truman

23 2,000 94 200,000
1946-47

Harry S. Truman

19 2,000 86.45 200,000
1948-49

Harry S. Truman

16.6 4,000 82.13 400,000
1950

Harry S. Truman

17.4 4,000 91 400,000
1951

Harry S. Truman

20.4 4,000 91 400,000
1952

Harry S. Truman

22.2 4,000 92 400,000
1953

Dwight D. Eisenhower

22.2 4,000 92 400,000
1954-60

Dwight D. Eisenhower

20 4,000 91 400,000
1961-63

John F. Kennedy

20 4,000 91 400,000
1964

Lyndon B. Johnson

16 1,000 77 400,000
1965-67

Lyndon B. Johnson

14 1,000 70 200,000
1968

Lyndon B. Johnson

14 1,000 75.25 200,000
1969

Richard M. Nixon

14 1,000 77 200,000
1970

Richard M. Nixon

14 1,000 71.75 200,000
1971

Richard M. Nixon

14 1,000 70 200,000
1972-73

Richard M. Nixon

14 1,000 70 200,000
1974-76

Gerald R. Ford

14 1,000 70 200,000
1977-1978

Jimmy Carter

14 1,000 70 200,000
1979-80

Jimmy Carter

814 2,100 70 212,000
1981

Ronald Reagan

13.825 2,100 69.125 212,000
1982

Ronald Reagan

12 2,100 50 106,000
1983

Ronald Reagan

11 2,100 50 106,000
1984

Ronald Reagan

11 2,100 50 159,000
1985

Ronald Reagan

11 2,180 50 165,480
1986

Ronald Reagan

11 2,270 50 171,580
1987

Ronald Reagan

11 3,000 38.5 90,000
1988

Ronald Reagan

15 29,750 28 29,750
1989

George H. Bush

15 30,950 28 30,950
1990

George H. Bush

15 32,450 28 32,450
1991

George H. Bush

15 34,000 31 82,150
1992

George H. Bush

15 35,800 31 86,500
1993

Bill Clinton

15 36,900 39.6 250,000
1994

Bill Clinton

15 38,000 39.6 250,000
1995

Bill Clinton

15 39,000 39.6 256,500
1996

Bill Clinton

15 40,100 39.6 263,750
1997

Bill Clinton

15 41,200 39.6 271,050
1998

Bill Clinton

15 42,350 39.6 278,450
1999

Bill Clinton

15 43,050 39.6 283,150
2000

Bill Clinton

15 43,850 39.6 288,350
2001

George W. Bush

15 42, 200 39.1 297,350
2002

George W. Bush

10 12,000 38.6 307,050
2003

George W. Bush

10 14,000 35.0 311,950
2004

George W. Bush

10 14,300 35.0 319,100
2005

George W. Bush

10 14,600 35.0 326,450
2006

George W. Bush

10 15,100 35.0 336,550
2007

George W. Bush

10 15,650 35.0 349,700
2008

George W. Bush

10 16,050 35.0 357,700
2009

Barack Obama

10 16,700 35.0 372,950
2010

Barack Obama

10 16,700 35.0 373,650
2011

Barack Obama

10 17,000 35.0 379,150

 

 

III.    WHERE DO OUR FEDERAL TAX DOLLARS GO?

April 12, 2013, Center on Budget and Policy Priorities

The federal government collects taxes to finance various public services. As policymakers and citizens weigh key decisions about revenues and expenditures, it is instructive to examine what the government does with the money it collects.

In fiscal year 2012, the federal government spent $3.5 trillion, amounting to 23 percent of the nation’s Gross Domestic Product (GDP). Of that $3.5 trillion, nearly $2.5 trillion was financed by federal revenues. The remaining amount (about $1.1 trillion) was financed by borrowing; this deficit will ultimately be paid for by future taxpayers. As the graph on the next page shows, three major areas of spending each make up about one-fifth of the budget:

  • Defense and international security assistance: In 2012, 19 percent of the budget, or $689 billion, paid for defense and security-related international activities. The bulk of the spending in this category reflects the underlying costs of the Department of Defense. The total also includes the cost of supporting operations in Afghanistan and other related activities, described as Overseas Contingency Operations in the budget, funding for which totaled $127 billion in 2012.
  • Social Security: Another 22 percent of the budget, or $773 billion, paid for Social Security, which provided monthly retirement benefits averaging $1,262 to 36.7 million retired workers in December 2012. Social Security also provided benefits to 2.9 million spouses and children of retired workers, 6.3 million surviving children and spouses of deceased workers, and 10.9 million disabled workers and their eligible dependents in December 2012.
  • Medicare, Medicaid, and CHIP: Three health insurance programs — Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) — together accounted for 21 percent of the budget in 2012, or $732 billion. Nearly two-thirds of this amount, or $472 billion, went to Medicare, which provides health coverage to around 48 million people who are over the age of 65 or have disabilities. The remainder of this category funds Medicaid and CHIP, which in a typical month in 2012 provided health care or long-term care to about 60 million low-income children, parents, elderly people, and people with disabilities. Both Medicaid and CHIP require matching payments from the states.

Two other categories together account for another fifth of federal spending:

  • Safety net programs: About 12 percent of the federal budget in 2012, or $411 billion, supported programs that provide aid (other than health insurance or Social Security benefits) to individuals and families facing hardship.  Spending on safety net programs declined in both nominal and real terms between 2011 and 2012 as the economy continued to improve.

These programs include:  the refundable portions of the Earned Income Tax Credit and Child Tax Credit, which assist low- and moderate-income working families through the tax code; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income for the elderly or disabled poor and unemployment insurance; various forms of in-kind assistance for low-income families and individuals, including SNAP (food stamps), school meals, low-income housing assistance, child care assistance, and assistance in meeting home energy bills; and various other programs such as those that aid abused and neglected children.

Such programs keep millions of people out of poverty each year. A CBPP analysis shows that government safety net programs kept some 25 million people out of poverty in 2010. Without any government income assistance, either from safety net programs or other income supports like Social Security, the poverty rate would have been 28.6 percent in 2010, nearly double the actual 15.5 percent.

  • Interest on the national debt: The federal government must make regular interest payments on the money it has borrowed to finance past deficits — that is, on the national debt held by the public, which reached $11 trillion by the end of fiscal year 2012. In 2012, these interest payments claimed $220 billion, or about 6 percent of the budget.

As the chart above shows, the remaining fifth of federal spending goes to support a wide variety of other public services. These include providing health care and other benefits to veterans and retirement benefits to retired federal employees, assuring safe food and drugs, protecting the environment, and investing in education, scientific and medical research, and basic infrastructure such as roads, bridges, and airports. A very small slice — about 1 percent of the total budget — goes to non-security programs that operate internationally, including programs that provide humanitarian aid.

***  Estimates of spending in fiscal year 2012 were based on the most recent historical data released by the Office of Management and Budget (OMB). (The federal fiscal year 2012 ran from October 1, 2011 to September 30, 2012.)

Reference:   “Policy Basics: Where Do Our Federal Tax Dollars Go?,” Center on Budget and Policy Priorities, March 12, 2013.  Accessed at:  http://www.cbpp.org/cms/?fa=view&id=1258