 |
| Punch cartoon (1907); illustrates the unpopularity amongst Punch readers of a proposed 1907 income tax by the Labour Party in the United Kingdom. (Photo credit: Wikipedia) |
By Thomas James Norton
THE SIXTEENTH OR INCOME-TAX AMENDMENT, HAVING OPERATED IN VIOLENCE TO AMERICAN PRINCIPLES RESPECTING PROPERTY AND JUSTICE, SHOULD BE REPEALED
As the panic of 1893 and the failures of crops which contributed to the insolvency of railroads and the closing of banks brought upon the theatre of government alien-minded philosophers advocating the imported Initiative, the Referendum, and the Recall as panaceas for whatever it was that was ailing them, so, after the panic of 1907, out came another group of politicians and "universitaires" and demanded an income tax to cure the sickness of the Nation.
For a time the panic of 1907 was worse than that of 1893, as in parts of the country the circulating medium disappeared and cities and various bodies issued "scrip" to be used as money.
Communistic beliefs from panic time in full effect
The platform of 1908 of the National Socialistic Party, speaking of that panic, demanded a "graduated" income
51
52
tax and a graduated inheritance tax as a means of distributing wealth.
[1]
It also called for nearly all of the "uplifts" brought into play a quarter of a century later and unctuously baptized as the "
New Deal" -- employment by the United States for the unemployed, help from the Federal Treasury for the needy,
public improvements to provide work, nationalization of utilities and some industries, "development" of many fields not before thought to be within the competence of government, insurance for health, accident, old age, death, and other things insurable, and practically anything else that anybody wanted.
1. Socialists have been charged with disagreement as to what they really stand for. From the platform of the National Socialist Party of 1908, following the very severe panic of the year before, a definition may be drawn. The writers of the platform betrayed a most comprehensive misunderstanding of the powers and obligations of our National Government. They called for:
1. Relief works through building schools and canals, by reforesting, by reclamation, and by extending all other public works;
2. Loans of money by the United States to States, municipalities, and for public works;
3. Ownership by the United States of railroads, telegraph and telephone lines, steamships, all land, and all industries;
4. Extension of the public domain to take over mines, quarries, oil wells, forests, and water power;
5. Extension of the graduated income tax and inheritance tax;
6. Abolition of the power of the Supreme Court to hold an act of Congress unconstitutional;
7. Creation of a Department of Health and a Department of Education;
8. Insurance against unemployment, illness, accident, invalidism, old age, and death;
9. Funds for the unemployed.
Some of those matters are within the police power of the States, but none lies within the jurisdiction of the Nation. The proposed taking over of property by taxation and by seizure is Communistic.
The reader should be profited by considering carefully how far we have already gone into that unconstitutionalism. How much of the "New Deal" and the "Fair Deal" comes from that -- from the junk piles of futile expedients with which wretched governments have strewn the highway of history?
53
The fallacies of the "New Deal" were old even when
Karl Marx demanded in 1848 "progressive," or graduated, income taxes -- together with the abolition of the right to pass estates at death -- to enable confiscation of private property and the rise thereby of the proletariat to political control. For they were employed by the several experimenters who tried to mitigate the conditions which brought on the
French Revolution of 1789. And in the 300s the Roman Emperor Diocletian, in the interest of his soldiers, fixed maximum prices for provisions and other articles of commerce and set maximum rates of wages, with severe penalties for disregard of the edict. For the purposes of this regulation he issued a special copper coin of the value of one oyster. In 1950, the "New Deal" is operating in the United States without even that much for a standard of money.
After the close of the war in 1945 a new government in England undertook the acquisition of private property by what it termed "nationalization."
"New Deal" a very ancient failure
The "New Deal" is a very ancient subterfuge for statecraft.
Knowing the type very well, the historians who wrote the
Constitution gave nothing that is in the "New Deal" any recognition whatever. Life, liberty, and property they left with men, to whom they belong, and for whom and by whom the Constitution was conceived for self-protection.
The "New Deal" is thoroughly unconstitutional.
Yet the persistence through the centuries of the idea that Government can do the business of man better than
54
he can, which showed up in this land of liberty in 1933 with the effrontery of a Stuart king or a Bourbon, is a fact that must keep Americans on guard.
States deposed themselves from constitutional sovereignty
The
Sixteenth Amendment to the Constitution of the United States wrought an unintelligent relinquishment by the States of the first power of governmental sovereignty -- that of raising revenue for self-maintenance.
Hamilton failed to foresee that in time the States, instead of defending their sovereignty in local affairs, would, through their representatives in Congress, undermine themselves
(The Federalist, No. 28):
"State governments will, in all possible contingencies, offer complete security against invasions of the public liberty by the National authority."
Plain income tax not objectionable
There is no objection to an income tax when legally laid -- when not made confiscatory by graduation -- but it should be levied by the States for use at home -- not gathered by the Nation and then redistributed as doles or donatives toward the weakening of the States and the enlargement of the central power.
It should probably not be laid on the income of manufacture or production.
Since graduation was contrary to constitutional principle, it should have been foreseen by statesmen that the
Income Tax Amendment as applied by Congress would work badly. It enabled the central Government, like an
55
octopus, to thrust a tentacle into the revenue supply of each State and drain it, leaving the State partially helpless to perform its essential functions and making it a beggar at the Capital for a share of its own money.
Nation given worst form of power
It put in the hands of the National Government a power of money -- in every hand the worst power there is -- never seen in the world before, in comparison with which that employed by the Imperial City for the plunder of the Roman provinces was an evil of small consequence.
Money in excess at Washington has covered the country with a thoroughly disreputable organization of politics -- the begging States having been to a degree forced to aid in carrying out, as baronies, the "objectives" of the superior authority from which they now hold their place on earth and to which they render most humble fealty.
Roosevelt totally lacking in knowledge of taxation
In the President's message to Congress and the country on April 27,1942, the first and most important of his seven specifics for keeping the costs of living from "spiraling upward" and for winning the war was "to tax heavily, and in that process keep personal and corporate profits at a reasonable rate."
"Through tax processes," he said, excess profits can be kept down, and at the same time "further large sums" can be raised for the financing of the war.
The plain import of that language is that "tax processes" may be employed -- as they certainly have been illegally
56
for nearly three decades -- for other purposes than the raising of necessary revenue for the support of strictly governmental functions.
When law was scientific, care was exercised to levy no more taxes than would meet the needs of government economically administered. President Coolidge said that taxation beyond that need is "legalized larceny." President Cleveland denounced almost as severely the taking by taxation of revenue not required.
Those two understood clearly the American meaning of the word "tax," as applied for upwards of 300 years. Neither to them nor to those before them was a tax a weapon. It was not an instrument for taking from those with possessions and bestowing, either directly or indirectly, upon those without.
President Roosevelt for the confiscation of Communism
The use of "tax processes" for transferring the property of the individual to the Government is the fundamental doctrine in the Communist Manifesto of 1848, promulgated by Karl Marx. By the "graduated" income tax, plus the abolition of the rights of inheritance, Marx would seize by government for the proletariat all private property.
"They [the proletariat] have nothing of their own to secure and fortify," wrote Marx; "their mission is to destroy all previous securities for, and insurance of, individual property."
The instrument to accomplish that destruction would be "a
heavy progressive [graduated] income tax."
"The abolition of all rights of inheritance" would be
57
used by Marx and his followers toward putting an end to private property.
Karl Marx elucidates his idea
Communism, belief in which has been held by many in our Government, was made clear by Marx as follows:
"The distinguishing feature of Communism is not the abolition of property generally, but of the bourgeois [capitalistic] property. But modem bourgeois private property is the final and most complete expression of the system of producing and appropriating products that is based on class antagonisms, on the exploitation of the many by the few.
"In this sense the theory of Communism may be summed up in the single sentence:
Abolition of private property."
The "heavy progressive" taxes which he proposed would transfer property from the bourgeoisie to Government, and Government would be in the proletariat.
Marx again:
"The immediate aim of Communism is the same as that of all the other proletarian parties: formation of the proletariat into a class, overthrow of the bourgeois supremacy, and conquest of political power by the proletariat."
[2]
2. Social and Political Doctrines of Contemporary Europe, Oakeshaft, pp. 88 to 101.
Perhaps the best way to define Communism is to present an abstract of the Communist Manifesto of 1848:
1. Abolition of property in land, and application of all rents of land to public purposes;
2. A heavy progressive income tax;3. Abolition of all rights of inheritance; (cont. on 58)
58
And men teaching and preaching that sedition have been permitted to run for the Presidency of the United States!
Communism the first "American way of life"
Communism was the first -- and quickly rejected -- American way of life. The Communism expounded by Lenin in
The Teachings of Karl Marx had been the earliest experiment in America in living. It was tried in Virginia and in the Plymouth Colony in Massachusetts. It was a failure in both places, as it failed in several later attempts in the United States when supported by abundant funds and by men and women of the highest learning.
Lenin wrote that the worker receives under Communism "a certificate from society" for the amount of work done. He gets in return from the public warehouse "a corresponding quantity of products," after there has been deducted "that proportion of labor which goes to the public fund." In the main that is the method in Soviet Russia today, according to Gen. Walter Bedell Smith, former ambassador to that country, in
My Three Years in Moscow.
(cont. from 57) 4. Confiscation of property of all emigrants and rebels;
5. Centralization of credit in the hands of the state by means of a national bank with state capital and exclusive monopoly;
6. Centralization in the hands of the state of the means of communication and transport;
7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan;
8. Equal obligation of all to work. Establishment of industrial units, especially for agriculture;
9. Combination of agriculture with manufacturing industries, and gradual abolition of the distinction between town and country by a more equable distribution of the population;
10. Free education of all children in public schools, abolition of children's factory labor in its present form, and the combination of education with industrial production.
59
Governor Bradford on failure of Communism at Plymouth
In
A History of Plymouth Plantation, 1606 to 1646, it is related by Governor Bradford (p. 147) that at first the land was tilled and other work done in common and that the product of toil went into general storage. From the warehouse those in charge of the colony made distribution according to service given. The undertaking failed from lack of incentive "even among the best settlers." After grave consideration by the officers of the colony a "parcell" of land was assigned to each family and the members of the family lived together. Immediately "corne" was much more widely planted.
"For the young men," wrote Bradford, "that were most able and fitte for labour and service did repine that they should spend time and streignth to worke for other men's wives and children without any recompence. The strong, or men of parts, had no more devission of victails and cloaths than he that was weake and not able to doe a quarter the other could. This was thought injuestice."
Of course, it was unjust, an affront to reason, a burden at which human nature rebels.
Thus the communal life was rejected at the beginning for American private enterprise.
American spirit called "wealth" by Hamilton
That spirit of self-reliance was regarded by Alexander Hamilton (
The Federalist, No. 11) as a considerable proportion of the capital which would build the United States:
"The unequalled spirit of enterprise which signalizes
60
the genius of American merchants and navigators, and which is in itself an inexhaustible mine of national wealth."
Government has been undermining that self-reliance until a critic has said that the people are more fearful of life than of death. And in 1949, so much had American spirit deteriorated (in places) that the Vice President could say in an address to an association of businessmen:
"As much as we wish for the good old simple days, the complexities of our lives have created an interdependence among all of our citizens. This has created a necessity for the guidance of the Government in the problems that beset our people."
Most of the worst "problems" have been created by men in Government who had never, before taking public office, exhibited any notable talent in the world of affairs. They have been incompetent "guides." Our constitutional system has been turned by them into a manufactory of problems and emergencies.
Those problems cannot be solved by Communism.
"Graduated" tax of Communism never proposed by Congress
In 1909 President Taft, who succeeded to an empty treasury, asked Congress to propose an amendment to the Constitution authorizing an income -- but not "graduated" -- tax. Congress made the proposal and it became the Sixteenth Amendment in 1913, just before President Taft went out. By a tax on corporations he had filled the Treasury, thus demonstrating that the income tax was not needed.
The purpose of the proposed Amendment was to take out of the Constitution, as it would affect an income-tax
61
law, the provision (section 2 of Article I) on which the Income Tax Act of 1894 foundered, namely:
"Direct taxes shall be apportioned among the several States which may be included within this Union, according to their respective numbers."
That is, according to population. The Supreme Court had held (157 U. S. 429) the taxes stated to be direct taxes, and that as they had not been apportioned by Congress among the several States, the act was unconstitutional. Hence, the Amendment:
"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."
Hamilton did not dream that the provision for uniformity in taxation which he was extolling would be stricken out (emphasis his):
"The abuse of this power of taxation seems to have been provided against with guarded circumspection. In addition to the precaution just mentioned, there is a provision that 'all duties, imposts and excises shall be
UNIFORM throughout the United States.'"
Sixteenth Amendment gave Congress no power to tax
That did not give Congress the power to tax incomes. It had that power before. All the Amendment did was to remove the need for apportionment among the several States.
Especially it did not authorize Congress to take leave of the rule and practice of uniformity and equality of treatment which had always governed in every field of taxation
62
and employ a method without rule, without reason, for the taking of money of the Americans for other purposes than the actual needs of government economically administered. It did not authorize Congress to confiscate the income of a man until it would not be what President Franklin D. Roosevelt called "too high." It did not empower Congress to drain the States of their resources and subject them to bureaucratic domination. Nor did it give authority to government to enter the fields of production, manufacture, agriculture, world saving and others, and to spend money for purposes not within the only area laid out in the Constitution, that is, "the common Defence and general Welfare of the United States."
Lawless government caused by money in excess
But those are among the many unconstitutional activities in which Government has been enabled to engage by use of the limitless funds gathered by the confiscatory income tax. Having mismanaged agriculture, manufacture, medicine, charity, and other nongovernmental activities at home, it took up direction of the affairs of the world by the worse than lavish use of money produced by the erroneous application of the Sixteenth Amendment.
For if what has been taking place in our land and other lands during the last third of a century had been intended by President Taft when he asked Congress to propose an amendment, he would have made specifications to that effect. He would have asked for a "graduated" tax.
"Graduated" tax not proposed by Congress
The Amendment proposed and ratified carried nothing on its face but the common tax levied on lands, buildings,
63
livestock, machinery, and personal property from the beginning. The constitution of every State commands the legislature to make taxes uniform, or by valuation, or in proportion to value, or by some other method of "equality of treatment." All property of a class must be taxed at the same rate. If one man in a class has ten times as much property as another, he will pay ten times as much tax, the levy for both being on one rate. He cannot be made to pay twelve times as much by the use of a higher rate.
Without the clearest specifications in the Sixteenth Amendment for "graduated" rates, showing a purpose to bring about, by radical departure from American method, what we have witnessed with consternation, Congress had no power to pass the act of October 3, 1913, and subsequent income-tax laws levying graduated taxes.
People had shown no enthusiasm for income tax
As it took the Socialists and Communists fourteen years after the decision of the Supreme Court holding the tax act of 1894 unconstitutional to get the proposal to amend, and four years more to secure its ratification, it is reasonable to assume that had the proposal plainly called for the "graduated" or confiscatory tax of Communism, it never would have been ratified. Indeed, had the people dreamed that the money of the States would be drained away, leaving them mendicants at Washington, the proposal as it was would have been defeated.
Article V of the Bill of Bights forbids that "private property be taken for public use without just compensation." When the United States wants the land of an American as the site of a post office, or for any other purpose, it
64
must bring a condemnation proceeding in the exercise of its eminent domain, when the need for taking the property will be proved and its value ascertained. That value the United States must pay.
Taxpayer entitled to benefit equivalent to tax
The law or doctrine of eminent domain applies in principle, and by sound authority, to property "taken for public use" by taxation, as it does to all other takings. The American whose money is thus taken by taxation must receive from government an equivalent value in return. That, he gets in protection to his "life, liberty, and property," for which purpose he established his constitutional system.
That principle was laid down as to taxation in a single, clear, short sentence by Judge Cooley in
Constitutional Limitations, 2d edition, p. 495 (italics inserted):
"As all are alike protected, so all should share the burden,
in proportion to the interest secured."
A man with an income of $100,000 should pay ten times more in taxes than the one worth $10,000, because he has ten times as much value needing the protection of the government which he established. But he should not, at the caprice of the spirit of Communism, pay fifteen or twenty times as much. Nor does he so pay in any field of taxation except in that where taxes on incomes, and on estates passing at death, are levied.
"Graduated" tax not applied to other property
In every other field all men have paid
one tax
rate, which in itself is proof that the "graduated" -- the arbitrary -- tax rate is obnoxious to the "due process of law" (its fair
65
play and procedural regularity) and to "the equal protection of the laws," which are the gist of all American constitutions.
As the statement of President Roosevelt was the most absolute assertion of an unlimited power in government to take property by taxation for other purposes than revenue, a belief which has for years been expressed in unscholarly seats of learning, in sections of the Press, and elsewhere, it is plain that at last we have "entered a boundless field of power," to use Jefferson's warning language, "no longer susceptible of any definition."
President Roosevelt for Marxist confiscation
In his radio address on September 7, 1942, President Roosevelt expressed this wholly unsound theory of the governmental power of taxation, which has been let pass without critical examination:
"Taxation is the only practical way of preventing the incomes and profits of individuals and corporations from getting too high. I have told the Congress once more that all net individual incomes, after payment of all taxes, should be limited effectively by
further taxation to a maximum net income of $25,000 a year."
That idea of the President, that he or his Government could limit the income of an American, is one phase of a fatuous belief which the schools have made common, namely, that rights to property are conferred upon him by law. Whereas, the Declaration of Independence says that he set up this Government himself "to secure these rights" which come to him from the Creator, "among which are life, liberty and the pursuit of happiness," that pursuit
66
including the acquisition of property. Necessarily his rights and property preceded the Government which he set up for the purpose of protecting them.
Tax must be for revenue, not punishment
In
Commentaries on the Constitution (page 329), Justice Story of the Supreme Court wrote that a tax for neither of the purposes stated in the Constitution -- "to pay the Debts and provide for the common Defence and general Welfare of the United States" -- would be "an excess of legislative authority."
When members of Congress returned to Washington from their homes after the election in November, 1946, and undertook to draw a tax bill to meet the wishes of the country for a 20-per-cent reduction of the levies on incomes, they were astonished to find that it is the small incomes that are supporting the extravagances and illegal spendings of the Government, and that the cut indicated would leave the Treasury without sufficient funds. The big boys, who were to be "soaked" when the Sixteenth Amendment was proposed, by levies on vast properties hitherto untaxed, are paying comparatively little.
How the tax load was divided
Taxpayers receiving a net income under $2,500 (small money now), who numbered 35,625,683 persons, paid $4,693,000,000 in income taxes in 1946.
Those with net incomes from $2,500 to $5,000 (also small money), numbering 15,157,265 persons, paid $5,444,000,000.
In the group from $5,000 to $10,000 net income
67
there were only 1,314,457 taxpayers, and they contributed $1,509,000,000.
The group having from $10,000 to $25,000 numbered only 551,267, and they contributed in taxes $2,181,000,000.
There were only 143,725 taxpayers with incomes from $25,000 to $100,000 and they paid $2,673,000,000.
In the group with incomes above $100,000 there were only 9,599 taxpayers, who took a burden of $1,100,000,000.
Low incomes carry big load of government
The two low-income groups paid $10,000,000,000 and the four higher-income groups paid $7,000,000,000.
The foregoing figures are from the
United States News of February 14, 1947, page 30, which commented that "in trying to give the big break to the little taxpayer, Congress runs up against those facts," and that "taxing the rich is not enough," although 86 per cent is taken from the income of those in "the highest income levels."
The report of the Secretary of the Treasury for 1946 shows receipts of more than 30 billion from "income taxes," but that amount includes "profit taxes" on transactions in business, as distinguished from wages, salaries, and other forms of personal income.
Who really got "soaked" when Congress passed a "graduated" income-tax bill which was not authorized by the Sixteenth Amendment of 1913, and which was therefore unconstitutional?
[3]
3. Whatever talk there may have been in the streets about "soaking the rich" by a graduated tax, or whatever may have been said by some in Congress on that point, the rule of interpretation is that the enactment must be taken at its face value. A radical change in the existing order -- like the introduction of a form of taxation not used against any other kind of property -- can be accepted only on a purpose most clearly (cont. on 68)
68
The very rich forsook the risks of industry and trade, forgot the troubles with employees over wages and working conditions, and retired to the velvet comforts of that most stupendous American business, the National Debt, largely tax exempt.
By beginning in time of peace (1913) the borrowing of money from the people of the country and securing, through the enticement of exemption from taxation, a high price in the market for its bonds issued therefor, Congress gathered away from taxable enterprises millions which rose to billions and are in 1950 headed for trillions -- all cleared of the taxes which had before gone to the support of government.
Necessarily those not owning bonds had to take a larger load of taxes to compensate for the exemption.
How much will the depletion thus caused of this country's powers of production and transportation, which won both wars, imperil the future of the United States?
How much did the corroding debt of England, attended by widespread poverty, for 125 years before World War I contribute to the debilitation of industry resulting in its "nationalization"?
(Note 3 cont.) expressed. The amendment proposed by Congress and ratified by the legislatures did not use "graduated" to describe the tax. Therefore, a graduated tax was not proposed.
"Where the language of an enactment is clear," said the Supreme Court of the United States (278 U.S. 269) ". . . . the words employed are to be taken as the final expression of the meaning intended. And in such cases legislative history may not be used to support a construction that adds to or takes from the significance of the words employed."
That is to say, authority "to lay and collect taxes on incomes" was authority to lay taxes as they are laid on all other kinds of property -- one rate on all property of the same kind, money in the case of incomes. In going beyond that, Congress violated the Constitution.
The talk about soaking the rich might have related to the fact that the big incomes (along with the little) never had paid any tax at all. It was quite proper to tax them -- but only constitutionally.
69
Courts of States had denounced "graduated" tax
Before the Government at Washington entered upon this
coup d'état, the supreme courts of several States had put legislatures right on the principles here under discussion.
In 1882 the Supreme Court of New Hampshire held a "graduated" tax on estates void for conflict with the command of the Constitution of the State, that taxes be proportional and reasonable."
In 1889 the Supreme Court of Minnesota held likewise.
In 1894 the Supreme Court of Ohio said:
"The rate per cent must be the same on all estates. There can be no discrimination in favor of the rich or poor. All stand on an equality under the provisions of the Constitution, and it is this equality that is the pride and safeguard of us all."
In 1898 the Supreme Court of Missouri, eighteen years before the Supreme Court of the United States sanctioned the graduated or confiscatory tax, expressed (143 Mo. 287) the like view, saying that it was "without rhyme or reason."
The next year the Supreme Court of Pennsylvania held (191 Pa. 1) that classification of different amounts of money as different kinds of property, and therefore subject to different rates of tax, is a fallacy and "necessarily unjust, arbitrary and illegal."
In short,
the graduated tax is Communistic.
Congress quickly repealed Civil War Income Tax
While in the income-tax laws of the Civil War there had been both graduations and exemptions, the levies
70
were so light and the graduations so undiscriminative that the legislation could not be taken as a precedent to support what the people have been bearing since the Act of 1913 in violation of the Income Tax Amendment.
The Act of 1861 levied 5 per cent flat on incomes over $800.
The Act of 1862 levied 3 per cent on $600 to $10,000; 5 per cent above $10,000.
The Act of 1864 levied 5 per cent on $600 to $5,000; 7½ per cent on $5,000 to $10,000; 10 per cent on more than $10,000.
The Act of 1867 levied 5 per cent flat on more than $10,000.
The Act of 1870 levied 2½ per cent flat for 1870 and 1871, "and no longer," quoting the words of the law.
Of the five levies, two were "graduated" and three were flat.
Congress recognized that such taxes could be justified only by the peril of war and through the exertion of the war powers, and it wiped them away as soon as it could.
It never returned to nonuniform taxes until the doctrine of Communism had been taken up by our "intellectuals."
In 1864 Congress called for the prayers of the country "to implore Him as the Supreme Ruler of the world not to destroy us as a people, nor suffer us to be destroyed by the hostility or connivance of other nations" -- referring to the unneutral conduct in our Civil War of England and France. In such circumstances of national alarm no American would question in a lawsuit the validity of taxes of whatsoever sort.
71
Income tax thus adjudged war measure
Congress itself, by repealing the Civil War taxes, declared in effect such levies to be unjustifiable in time of peace.
The most striking example of the fatuous condition of affairs in our country is in the call of States for an amendment to prevent their representatives in Congress from weakening them by the income tax and the estate tax of more than 25 per cent. Article V authorizes the States to apply to Congress "to call a Convention for proposing Amendments," and during 1949 many States made the application.
First, as a practical matter, the action is objectionable, because if Congress should get authority to take 25 per cent of incomes and estates, it will do so forever -- whereas, our history for 130 years demonstrated that Congress can get along without either of those taxes.
Second, the needed amendment -- if the States fear (as they may have reason to) that their representatives in Congress will not refrain from exhausting them by taxation -- is one forbidding income and estate taxes by Congress except in time of war. As elsewhere shown herein, the Civil War income tax was promptly rejected by Congress as a tax justifiable in time of peace.
That definition of the tax should stand forever.
But the spectacle of citizens petitioning for protection from the men they elect to Congress! Can you believe it?
Exemptions as unconstitutional as graduation
And the exemptions granted in connection with the income tax and bonds, and in other relations, are just as
72
obnoxious to the Constitution as is the graduation. The Supreme Courts of the States just cited condemned exemptions along with graduations.
During a housing and building shortage caused by World War I the legislature of New Jersey, to encourage construction, enacted a law exempting from taxation for five years all new structures. It was held (116 Atlantic 328) void for disregard of the command of the Constitution of the State for uniformity of taxation upon all.
Cooley, the great authority of his time, said in his work
Taxation (2d ed., p. 215) that "it is difficult to conceive of a justifiable exemption law which would select single individuals or corporations, or single articles of property, and, taking them out of the class to which they belong, make them the subject of capricious legislative favor. . . . It would lack the semblance of legitimate legislation."
[4]
Exemptions prime cause of French Revolution
When Louis XVI convoked (1789) the States General it appeared that the troubles of the country which resulted finally in the Revolution sprang from exempting government officials and the favored classes from taxation.
The Income Tax Law of 1894 exempted all incomes below $4,000. Although the law was held void for failing to "apportion" the burden among the States according to
4. The constitutions of the States generally authorize the exemption from taxation of church property, of school property, of public property and buildings, and of other property not used for profit. Such properties are not in competition with those employed in providing a livelihood for men, who secure through taxes the protection of government in their endeavors. Further, by teaching and other work they give service to society equal to or above a yield in taxes. They are not really "properties" within the class for taxation.
73
population, as directed by the Constitution, Justice Field took occasion to denounce the exemption of all incomes below $4,000. "The present assault upon capital is but the beginning," he wrote. "Unless the rule of the Constitution governs, a majority may fix the limitation at such a rate as will not include any of their number."
American officials like exemptions
Yet Congress, being ignorant of or indifferent to these fundamentals, has been tossing tax-free salaries to favored persons with unrestrained prodigality. In 1947 it so favored officers of the World Bank, making the $22,500 salary of the vice president equal to $38,000, the salary of the executive director of $17,500 equal to $26,000; and two employees of the State Department who had been working for $10,000 were given exempt salaries of $17,500, equal to $26,000. Frequently since then the dispatches from Washington have told of similar favors to those specially beloved.
[5]
5. Section 1 of Article II of the Constitution commands that the "compensation" of the President "shall neither be encreased nor diminished during the Period for which he shall have been elected." In January, 1949, just before the President entered upon the term for which he was elected in November, 1948, Congress increased his salary from $75,000 a year to $100,000.
In January, 1949, Congress granted to the President $50,000 a year to cover his expenses, which theretofore had been carried in the budget in support of the White House. This grant was made exempt from the income tax. If it was for expenses, it was not taxable as salary, and the exemption was superfluous. If it was in truth salary -- for the usual report on expenses was waived -- then it could not be legally exempted. And, more important still, it could not be enjoyed by a President before the next term, beginning in January, 1953.
It may interest the taxpayer to study those cards as played.
The whole White House force of 225 (53 under Roosevelt and 87 under Hoover) received increases from the taxpayers. (Cont. on 74)
74
Colossal properties illegally exempted from taxation
In 1931, before the saving of mankind from want and fear by Government became known to Government as the first of its expanding duties, there were outstanding $22,536,000,000 of bonds wholly exempt from (1) the property tax, from (2) the normal tax, and from (3) the surtax of the United States, as shown by the Report of the Secretary of the Treasury for 1932, page 439.
That property, paying no taxes as property and not taxable on its income, was greater than the aggregate value of Class I railroads in the United States (95 per cent of mileage and 97 per cent of total earnings) as found by the Interstate Commerce Commission in 1945, namely, $19,571,000,000. The railroads paid over a billion in taxes that year.
Enormity of prejudice to overburdened taxpayers
What would the average man say if word were to be given out that Government (National and State) had determined to exempt the railroads from that burden and put the billion load on other taxpayers!
While at first the common man was to be very kindly treated under income-tax laws as Government would pro-
(Note 5 cont.) Special counsel was advanced from $12,000 to $20,000 a year. President's aide (labor) from $15,000 to $20,000 a year. 3 secretaries, each from $10,830 to $18,000 a year. 5 administrative assistants from $10,330 to $15,000 a year. 10 Cabinet members from $15,000 to $22,000 a year.
A number of lesser functionaries were favored with increases of pay, 900,000 classified workers receiving advances aggregating $130,000,000 yearly.
75
ceed with the new weapon to "soak the rich," it has come to pass that a person with an income of $600 a year (which takes in practically all wage earners) must report his earnings. Yet banks, many of them living largely on the Public (National and State) Debt, trust companies holding vast estates resting on exempt bonds, universities and other institutions with exempt bonds a considerable part of their endowments, are released from support of Government to the extent of their property in bonds and on the income of some of them.
Wrong should be righted by guilty States
The States, by proposal in Congress or by action of their legislatures under Article V, should amend the Constitution again by repealing the Sixteenth Amendment and resuming police Jurisdiction of the wealth of their people, as they repealed the Eighteenth Amendment after becoming convinced that they had made a mistake in giving to the Nation a burden of police which it was not -- and could not be -- organized to carry.
Congress would then still have power to tax incomes, as it had before the Amendment, but it would be obliged to do so Justly -- for revenue only, not for the distribution of property, for leveling down possessions, for punitive purposes, or for stripping Americans for the help of Europeans who are antagonistic to our Government and our beliefs.
And it would be unable to bleed the States to financial helplessness, where the Supreme Court thought them to be when it gave sanction to the Social Security Law chiefly on that error. For if the representatives of the people of the States in Congress at that critical juncture had repealed the Income Tax Law, as they should have
76
done, the States would have the money properly belonging to them and far more than enough to meet the needs of the people.
Washington preferred to treat the States as bankrupt, and execute a
coup d'état. The police power thus exercised by Congress over the "health, safety, morals, education and general well-being of the people" was withheld from it by the Constitution and
-- for double security -- denied to it by the Tenth Amendment. Its conduct was twice wrongful.
The States must return to the Constitution and resume control of their Union, their property, and their prerogatives.
The fallacious idea of the Supreme Court
The fallacy on which "graduated" (or what Karl Marx named "progressive") or discriminative -- and therefore unconstitutional -- taxes are based was expressed by the Supreme Court of the United States in 1898 in a case (170 U. S. 283) arising under a law of Illinois and involving
estate or inheritance taxes.
Probably the success of that litigation for the tax gatherer induced Congress -- which had failed with its Income Tax Law of 1894 -- to step in and enact (1898) a Federal
Estate Tax Law with a "graduated" scale and thereby get some funds of a new sort. In 1900 that Act of Congress was upheld (178 U. S. 41) on the "principle" laid down in the case from Illinois, to be quoted presently.
Then came the Income Tax Amendment of 1913, which made no mention of "graduation." Congress immediately enacted, in October of that year, a "graduated" tax levy, which was upheld (240 U. S. 1) by the Supreme Court
77
in 1916 on the "principle" of the two preceding decisions respecting
estates passing at death.
Justice Brewer dissented from the doctrine established because "equality in right, equality in protection, and equality in burden is the thought which runs through the life of this Nation and its constitutional enactments from the Declaration of Independence to the present hour."
State Supreme Courts understood subject clearly
Before those decisions, half a dozen of the Supreme Courts of the States had held, as previously shown, graduation to be repugnant to protective clauses in all American constitutions, and especially to the clause commanding "equal protection." The Supreme Court of the United States made no reference to those decisions.
The "philosophy" enunciated by the Supreme Court in 1898 and repeated in 1900 and 1916 was in this language, practically a copy of the erroneous holding of the Supreme Court of Illinois:
"The right to take property by devise [will] or descent [by statute in absence of will] is the creature of the law, and not a natural right -- a privilege, and, therefore, the authority which confers it may impose conditions upon it."
That is, the law may say to the transmitter or the taker (or to both as it has come to pass) that this property will not descend unless you accept a graduated scale of taxation on the "privilege" which a gracious government extends to you.
Some history on property rights
That is at once historically erroneous and contrary to the first fundamental of American Government, as stated
78
by Justice Brewer. The Americans set up Government "to secure" (the Declaration of Independence says) preexisting rights to life, liberty, and the pursuit of happiness -- the pursuit being largely the pursuit of property and the comforts and cultures which it brings. And as his Constitution twice puts property in the class with liberty and life, how can it be contended that law (which he writes himself) gives to him his property any more than it gives him his life?
In the earliest of English charters (1101) we find recognition by King Henry I of the preexisting right of a subject to dispose of property at death. By that charter, which Henry was compelled to sign as a condition of being crowned, he was restoring to the people rights which had been usurped by William the Conqueror (1066) and his son, William II. Section 7 of the charter reads:
"If any of my barons or feudal dependents shall fall sick, according as he shall give away his money, I concede that it shall be given. But if, prevented by unlikely chance of physical infirmities, he shall not give away his money or arrange to give it, his wife and children or relations and lawful heirs shall divide it up for the good of his soul as shall seem best to them."
Government not to take property at death
That is, in no circumstances could the King any longer take the property of a subject at his death. When an Englishman "arranged" to give away his money, that was a will (which need not have been in writing); when he failed to arrange, his property went by custom (now in the United States by his own Statute of Descent) to his widow and other heirs.
79
Of that right, which did not come from the King of England (and does not come from Government or "law" in the United States), Blackstone wrote in 2
Commentaries, page 491:
"With us in England this power of bequeathing is coeval with the first rudiments of the law: for we have no trace or memorials of a time when it did not exist."
That is, the right to distribute property at death is a natural right. Feudalism in England denied it for a time. A recent English writer on the law says that the estate tax is a recrudescence of Feudalism.
[6]
Hallam, the constitutional historian, tells us (
Middle Ages, p. 445) that, in early England, man passed lands and other property at death by his own right, not by governmental permission, but by the custom of which he was, of course, the maker:
"The descent of lands before the Conquest [1066] was according to the custom of gavilkind, or equal partition among the children."
6. On December 23, 1949, the Associated Press reported that a 9-million dollar oil company in Pennsylvania had sold its property to a larger company because "the higher and higher inheritance taxes, as well as income taxes, have meant that a business developed by an individual, or by a small group of individuals, cannot be passed on to a second generation."
William the Conqueror (1066), who rooted Feudalism in England, and his sons took the estate at death until stopped by the Charter of 1101.
So many properties in this country had been unable to marshal the cash to meet the estate tax levied upon the death of an owner or part owner that the practice became common to carry life insurance on the members and thereby with ready money prevent the destruction of the company.
In reporting to 1,000 employees the sale of the property first mentioned, the two men owning most of the stock said: "In the event of the death of one of our principals, a sale of the company would be almost inevitable."
The history of tyrannical governments does not disclose many cases to beat that, of a common sort in our land of supposedly independent men.
80
Thus, the history of the law is that the English-speaking man does not get from government the "privilege" of transmitting property at death, or of taking it by bequest or inheritance upon the death of another.
Supreme Court decision rested on sand
The foundation of the decision of the Supreme Court of the United States upholding the "graduated" -- capricious and confiscatory -- tax of Communism was laid in sand.
From that developed the most cruel fleecing by taxation of a great people by the Government which they established to protect them and their property that the world has known.
From the money, almost beyond measurement, came the intoxication of Government with power.
The theory applied by the Supreme Court in the case of the "graduated"
inheritance law of Illinois, namely, that as transmission of property is by permission of government, conditions can be added, should not have been employed to justify "graduated" taxes on
incomes. For certainly the living man does not require permission of government to engage in income-yielding activities!
Historically and legally untenable as the first decision was, the last was worse.
Where are we "at" with this money?
Where have we been brought with the money yielded by the unconstitutional application of the Income Tax Amendment?
In 1949, the National Government spent $6 for every $5 collected. For 15 weeks of the fiscal year beginning July 1, expenditures were 12 billion and collections were 10
81
billion. That proportion for the full year would bring a deficit of more than 7 billion.
| The Truman administration spends yearly | 45 billion |
| The Roosevelt administration spent (including War) | 81 billion |
| The Hoover administration spent | 3.8 billion |
| The Coolidge Administration spent | 3 billion |
| The Harding administration spent | 3.8 billion |
| The Wilson administration spent (including War) | 5.8 billion |
| (Figures from Washington Bureau, Chicago Tribune) |
And at the close of the first session of the 81st Congress in October, 1949, it was announced that higher taxes would be levied at the next session!
Where the point of peril is
As remarked elsewhere in another relation, and as has been learned by the dwellers along the rivers of the country, it is the first trickle of the water over the levee that must be prevented. The Constitution is a levee to prevent power in Government from breaking into a boundless field "no longer susceptible of any definition."
It is the obligation of the schools, colleges, and universities to make the American competent to see what is coming before it strikes him down.
The Americans who founded the Republic had such education. In a speech in the House of Commons in 1775 defending them, Edmund Burke remarked on this, saying
82
that "they
anticipate the evil, and judge of the pressure of the grievance by the badness of the principle."
That is where latter-day education has failed the American.
http://www.barefootsworld.net/nortonuc04.html Thanks to the folks over at Barefoot's World.
