Death and Taxes

Having just celebrated the day we remember the One person who survives death, let's turn our attention to taxes.

The framers of the Constitution knew that the federal government would need a stream of income to pay for the modest responsibilities allocated to Congress and to fund the operations of the three branches. To this end, they continued the custom of levying duties on imported goods - a logical move since the federal government manages the security of the nation's borders. They also provided for excise taxes. Excise taxes had a history of controversy. They may be collected at a time of transfer before or upon delivery to the end customer on a wide range of goods. It seems the framers felt they were properly levied only on "luxuries," i.e., not commodities. But the practice of taxing commodities was virulent in the land, and - well into the 19th Century - even Thomas Jefferson railed against it. The preeminent Constitutional mandate on the Congressional power to tax was that "all Duties, Imposts and Excises shall be uniform throughout the United States."

The Constitution is silent on the matter of ad valorem property taxes. But the enumerated powers of Congress do not seem to empower it to deal much with individuals, and the Bill of Rights spends a lot of energy limiting the power of Congress to deprive individuals of rights, property, or other freedoms that derive from a Superior Power. Further, the meaning of the Fifth Amendment is vitiated if all Congress need do to take property would be to enact a law authorizing a taking without compensation in order to invoke "due process."

Comes now the Sixteenth Amendment. "In 1895, in the Supreme Court case of Pollock v Farmer's Loan and Trust (157 U.S. 429), the Court disallowed a federal tax on income from real property. The tax was designed to be an indirect tax, which would mean that states need not contribute portions of a whole relative to its census figures. The Court, however, ruled that the tax was a direct tax and subject to apportionment. This was the last in a series of conflicting court decisions dating back to the Civil War. Between 1895 and 1909, when the amendment was passed by Congress, the Court began to back down on its position, as it became clear not only to accountants but to everyone that the solvency of the nation was in jeopardy. In a series of cases, the definition of "direct tax" was modified, bent, twisted, and coaxed to allow more taxation efforts that approached an income tax.

"Finally, with the ratification of the 16th Amendment, any doubt was removed. The text of the Amendment makes it clear that though the categories of direct and indirect taxation still exist, any determination that income tax is a direct tax will be irrelevant, because taxes on incomes, from salary or from real estate, are explicitly to be treated as indirect. The Congress passed the Amendment on July 12, 1909, and it was ratified on February 3, 1913." (Steve Mount - USConstitution.net)

Thus was opened the door to direct federal taxation of income. It took Franklin D. Roosevelt to deform this abuse of the public weal into a progressive taxation scheme that today exempts the majority of earners from making any contribution to the federal purse (other than Social Security and Medicare "premiums").

If we are to save our republic, we must put an end to this form of taxation.

Taxing production penalizes investment and effort, and does nothing to encourage thrift. Progressive taxation encourages Congress to enact entitlements for many people that are paid for by a few. This will lead to the fall of the republic as surely as free bread and circuses preceded the fall of Rome. We need only watch the hauteur with which the Sultans of Washington treat anyone who disagrees with them to see this pernicious effect today.

Of course, we need to rein Congress in. We need to elect men and women who have read the Constitution and mean what they say when they swear to uphold and defend it. There may be five or six such persons in the House and Senate combined right now. But the power of "free" lunches over the electorate is strong indeed. How shall we make explicit the evils of the current regime to propel voters to make change?

I believe strongly that sales taxes levied at the point of transfer to the consumer are the most fair and effective way to collect what Congress requires and to ensure that voters see the consequences of Congressional action. Such taxes have the added virtue of falling collections when the business cycle turns down, reducing government's power to spend when the taxpayers suffer. When sales taxes are collected, it doesn't matter if you are married, straight, or legal. It doesn't matter if you are rich or poor. It takes the federal government out of the social engineering business. Rich people spend much more than poor people, so they will continue to pay much more tax. But everyone will pay some tax! Since everyone benefits from national defense, the safeguarding of patents, the building of post roads, and the protection by the federal government of our rights to life, liberty, and the pursuit of happiness, it is only fair for everyone to contribute.

Congress will have to levy a national sales tax of about 20% to come close to making up for reduced income and death tax collections. It will be essential to cease the practice of tax withholding upon the imposition of a sales tax. January 1st would be a suitable date. Imagine the wailing and gnashing of teeth that will ensue. Those who have formerly paid income tax will see increased take home pay and have no trouble paying more for gasoline, groceries, or clothes. Realtors will rise up in arms as the effect of taxation on new and used homes will be stunning. The same for auto dealers. But the loudest cries will come from those who have paid nothing into the national till under the current progressive tax scheme. Remember, they outnumber those who are currently paying income taxes.

Such a nightmare scenario keeps the Sultans of Washington from even whispering about replacing the income tax with a sales tax. They have engineered so much bias into the current taxation scheme that to unwind it would entail enormous pain and suffering, and might even force them to live on their formidable pensions and free health care, rather than to continue their reigns. Imagine the loss of prestige.

Will we continue slouching toward socialism, fascism, or worse? Will the United States of America become an irrelevant mirror of European statism, losing our cultural identity to the invading horde with the complicity of Congress? Will the bias against hard work, thrift, and self-reliance that is sweeping Washington and our universities triumph? Are we in the twilight of the republic?

I fear the republic must utterly fail before we can reverse this trend. I pray I will be proven wrong.