The Origin of the Income Tax
- From: "Shyster1040" <Shyster1040@xxxxxxxxxxxxxxxxx>
- Date: Tue, 25 Oct 2005 19:54:27 -0400
The Origin of the Income Tax
by ChristianAnarchist <bob23@xxxxxxxxxxxx> Oct 25, 2005 at 05:51 PM
Read this article at:
http://www.liberty-news.com/showNewsletter.php?id=200409111
The Origin of the Income Tax
by Adam Young
"The freedoms won by Americans in 1776 were lost in the revolution of
1913," wrote Frank Chodorov. Indeed, a man's home used to be his castle.
The income tax, however, gave the government the keys to every door and
the
sole right to change the locks.
Today the American people are no longer the master and the government has
ceased to be the servant. How could this be? The Revolution fought in the
name of the inherent natural rights to life, liberty and the pursuit of
happiness promised to enthrone the gains of individualism. Instead,
federal
taxation bribes the States and individuals to serve the interests of
ever-greater submission to the centralized will.
How did tax slavery come to the land of the free?
1812
The first proposal to impose an income tax on America occurred during the
War of 1812. After two years of war, the federal government had
accumulated
a then-staggering $100 million of debt. To fund the war against Britain,
the! government doubled the rates of its major source of revenue, customs
duties on imports, which obstructed trade and ended up yielding less
revenue than the previous lower rates. At the height of the war, excise
taxes were imposed on goods and commodities, and housing, slaves and land
were taxed. After the war ended in 1816, these taxes were repealed and
instead a high tariff was passed to retire the accumulated war debt.
Thankfully, the notion of an income tax was defeated.
However, the malevolent spirit of the income tax reappeared as a measure
to
fund the Union armies in the war to prevent the secession of the
Confederacy. The war was expensive, costing on average $1,750,000 a day.
Struggling to meet this expenditure, the Republican Congress borrowed
heavily, doubled tariff rates (the Morrill Tariff initially provoked the
Deep South to secede), sold off public lands, imposed a maze of licensing
fees, increased old excise tax rates and created new excise taxes. But!
none of this was enough.
1861
In July 1861, th e Congress passed a 3% tax on all net income above $600
a
year (about $10,000 today). However, no revenue was ever raised because a
second tax passed before the first was due (on June 30, 1862). The war's
demand on resources made the earlier tax ineffective, and the sale of
bonds
could not keep up with the expenditures of the administration and the
armies. In March, the Congress passed an income tax of 3% on annual
incomes
of $600 to $10,000 and 5% on incomes from $10,000 to $50,000 and threw in
a
small inheritance tax too.. Lincoln signed the bill on July 1, 1862 to
take
effect a month later. The Union debt then stood at $505 million. This tax
also included the first appearance of withholding and was applied to
federal salaries and on interest and dividends.
In 1863, Congress then passed a special 5% tax on incomes above $600 to
pay
for an army recruitment program that would pay men $2 per recruit and pay
recruit's their first month's pay in advance.
In mid-1! 864, the rates were raised again. The 3% tax on incomes above
$600 was increased to 5%, a new 7.5% rate was introduced on incomes over
$5,000, and the old rate of 5% on incomes above $10,000 was raised to
10%.
The tax on interest and dividends was also raised from 3% to 5%.
And for the first time, with the changes, Americans now had to swear to
the
veracity of their tax returns, and government assessors could now
challenge
a return. The penalty for not filing a tax return was likewise doubled to
10%..
At first, the income tax raised comparatively little revenue in relation
to
the war's demand for it. Harvesting only $2.7 million in 1862?1863, by
the
next year, the tax pulled in $20.2 million. And believing that many
large-income earners were eluding the taxman, Congress raised the rate on
incomes over $5,000 to 10% and gave the assessors the power to estimate
income and increased the penalties for noncompliance, from fines of 25%
to
double that for filing fra! udulent returns. By 1866, 30% of federal
revenues derived from the inc ome tax totaling $73 million, and derived
primarily from just three states, New York, Pennsylvania and
Massachusetts.
In a move to increase compliance and the veracity of returns, the
government even made tax returns available to the press. This practice
was
outlawed in 1870.
The Confederacy also experimented with a progressive income tax,
eventually
imposing a tax in kind that further destroyed the already ruptured and
blockaded economy of the South.
1865
After the war ended, the income tax continued on to pay the government's
gigantic debt, but resistance was building. In 1867, progressing rates
were
replaced with a flat tax of 5% on all incomes above $1000 a year.
However,
the penalty for failure to file was raised to 50% and the payment date
was
moved from June 30 to April 30.
This income tax expired in 1870 and was replaced with a 2.5% tax on
incomes
above $2,000. Finally, when that law expired in 1872, the United States
wa!
s again without an income tax.
In the post-war years, a booming economy produced tariff surpluses for
decades, but this didn't deter many attempts to reintroduce an income
tax,
with members of Congress introducing sixty-eight bills to do so between
1874 and 1894.
1894
Amid the panic of 1893, an amendment was passed establishing a 2% tax on
all incomes above $4,000 a year (about $50,000 today), but exempted the
salaries of state and local officials, federal judges, and the president.
Democratic Senator David Hill of New York lamented, "It may be
impracticable that our distinctively American experiment of individual
freedom should go on."
President Cleveland opposed the income tax, but let it become law without
his signature, believing it to be unconstitutional. In 1895, the Supreme
Court ruled 5-4 against the income tax, saying that its provisions
amounted
to a direct tax, which was prohibited by the U.S. Constitution.
A! rticle I, Section 8 and 9 declares that direct taxes must be apportion
ed amongst the states according to the census. The Sixteenth Amendment
was
designed to get around this problem.
1895?1909
Aside from an attempt to float an income tax to pay for the
Spanish-American war, the income tax largely disappeared as a major
issue.
Nonetheless, the Democratic Party, turning its back on its Jeffersonian
heritage, endorsed a constitutional income tax amendment in their party
platforms of 1896 and 1908.
In 1908 Theodore Roosevelt endorsed both an income tax and an inheritance
tax, becoming the first President of the United States to openly propose
that the political power of government be used to redistribute wealth.
Meanwhile, factions within the Congress cobbled together a compromise
amendment and in 1909, President Taft, known to be favorable to an income
tax, if not necessarily an amendment, stated that although ratification
may
be difficult, he had "become convinced that a great majority of the
people
of this ! country are in favor of vesting the National Government with
power to levy an income tax."
That same year, the income tax amendment passed overwhelmingly in the
Congress and was sent off to the states. The last state ratified the
amendment on February 13, 1913. The Springfield Republican reported "The
Sixteenth Amendment owes its existence mainly to the West and South,
where
individual incomes of $5,000 or over are comparatively few."
1913
Richard E. Byrd, speaker of the Virginia House of Delegates, predicted,
"a
hand from Washington will be stretched out and placed upon every man's
business. .. . . Heavy fines imposed by distant and unfamiliar tribunals
will constantly menace the taxpayer. An army of Federal officials, spies
and detectives will descend upon the state. . . ." Pandora had opened the
box.
The presidential election of 1912 was contested between three advocates
of
an income tax. The winner, Woodrow Wilson, after the ratific! ation of
the
Sixteenth Amendment, called a special session of Congress in April 1913,
which proceeded to pass an income tax of 1% on incomes above $3,000 and
applied surcharges between 2% and 7% on income from $20,000 to $500,000.
A
few years later the Supreme Court kissed and blessed progressivity.
The income tax returned as the product of an unholy combine between
statist
intellectuals with visions of state-sponsored utopias, envious demagogues
and the desire by established, wealthy interests to prevent any
competition
to their place and to offload business costs to an expanding regulatory
welfare state.
At first the revenue raised by the new income tax was disappointing: only
$28 million in 1914. But then it accelerated. $41 million the next year,
when the top rate was 7%, and nearly $68 million in 1916, when it was
raised to 15%. Eventually more than $1 billion would be pulled in by the
income tax during the whole of World War I, when the rates were raised to
67% in 1917 and 77% in 1918, and make the hated tax the permanent!
feature
it has become today.
After the war, the top rate would fall to 73%. In the 1920's it fell to a
low of 24% in 1929 but never again got as low as the pre-war rate of 7%.
What would Americans do for a 7% rate today, one wonders? Hoover and the
Republicans raised the rates to 25% in 1930, then to 63% in 1932. Under
the
corporate statism of the New Deal, rates leaped to 79% in 1936, 81% in
1940, finally exhausting itself at 94% in 1944?1945.
The lowest rates showed the same appetite, advancing from a 1% rate on
incomes below $20,000 in 1915. In 1917, it became 2% up to $2,000, then
6%
up to $4,000. By 1941, the lowest rate was 10% on incomes below $2,000.
In
1945, this had jumped to 23%. Today it is 10% on annual income up to
$7,000; 15% on income below $28,000. The top 10% of all income earners
pay
60% of all tax revenue.. And the top half pay over 95% of all revenue
raised by the federal income tax. The average American now works twenty
years for the go! vernment simply to pay his taxes.
In 1943, the government bega n withholding taxes on the advice of Milton
Friedman. After the war ended, this method of stealth taxation (and tax
increases) continued.
Not until 1964 were the top rates lowered, down to 77%. In 1982, the top
rate was lowered to 50% and by the late eighties the rate had been
lowered
to 28%. But rates were raised again to 31% under George H.W. Bush, and
again in 1993 to 39.6% under Clinton. George W. Bush apparently holds as
an
unshakeable principle that no American should be taxed more than a third
of
his income by the federal government. John Kerry, should he become
president, appears likely to suggest the rates be raised back to the
Clinton level.
The income tax lived up to its nature during World War II, devouring
American wealth and liberties like a swarm of locusts, where it became
the
nearly universal tax we know today. In 1940, fewer than fifteen million
tax
returns were filed. Just ten years later in 1950, the number would be
fifty-three million. In! 1939 the income tax raised $1 billion. 16 years
later it would raise $19 billion. The state had found its most fertile
harvests?middle class and working-class taxpayers. As Chief Justice John
Marshall remarked, truly "the power to tax involves the power to
destroy."
Adjusting for inflation, in the 81 years between the enactment of the
income tax in 1913 to 1994, government spending increased 13,592%!
The great critic of the income tax, Frank Chodorov wrote "Whichever way
you
turn this amendment, you come up with the fact that it gives the
government
a prior lien on all the property produced by its subjects." The United
States government "unashamedly proclaims the doctrine of collectivized
wealth. . . . That which it does not take is a concession."
It was with great honesty that Frank Chodorov lamented, "America is no
longer the America of the Declaration of Independence."
-----
Source: http://www.mises.org/fullstory.aspx?control=1597
Aww, how cute! Trouble is, income taxes were always permissible taxes,
and, as per Springer v. U.S., Pollock v. Farmer's Loan & Trust Co., and
Brushaber v. Union Pacific, were indirect taxes in the nature of an
excise, and entitled to enforcement as such, unless, after Pollock, such
taxes were imposed on the income derived from real or personal property,
in which case they were also subject to the apportionment rules otherwise
only applicable to direct taxes.
Thus, the origin of the income tax, as a theoretical possibility, can be
laid at the feet of the Framers - hardly a "grand conspiracy."
.
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