An Income Tax raises a lot of money fast.  That’s why the British did it around 1800 to defeat Napoleon.  But then they let it die.  The Empire became the powerhouse for prosperity … well, until other factors caused its demise.

Lincoln used an Income Tax to raise a lot of money fast to put down ‘the rebellion’.  It was challenged in Court but before it could be decided, the Civil War was over, the tax lapsed and the Court said, “what tax?”  No decision was given.

But it is important to grasp that the challenge was based on the definition of DIRECT TAX. 

A DIRECT TAX is a tax directly on a person or his property, simply for existing.  For instance, your county property tax on your home is a Direct Tax.  The greater the value of your house, the greater the tax.

A state tax on businesses, based on the value of their inventory – the Inventory Tax – is a Direct Tax.  The more stock your store has on hand, the more tax your neighborhood furniture store, grocery store, every store, pays.  

The Constitution says DIRECT TAXES are to be done only by person – each parson pays a buck, or 10 or 100.  The General government (as the Founders called the new government being created by the Constitution) would not tax a person for existing, or his stuff.

But if the General Government felt the need to do so, they would have to ‘apportion’ it among the ‘several States’ in the same way members of the House of Representatives are ‘apportioned’.  So if the census says a state has a million people, they have to pay a million bucks.  Another state has two million, that state pays two million.  

COURT DECISION

A few decades after the “War of the Rebellion” (as it is known in the Library of Congress), Marxism spread through Europe.  It spawned a Progressive movement here.  The General Government (now called the Federal Government), passed another Income Tax in 1894.

The same challenge was made.  It moved quickly through the courts.  In 1895, in Pollock v. Farmers' Loan & Trust Company, 158 U.S. 601, income tax was determined to be a Direct Tax.  A tax on income was unconstitutional because it was not apportioned, etc. 

CONSTITUTIONAL AMENDMENT

Progressives went to work -- after all, a progressive income tax is one of the planks of the Communist Manifesto.  They cajoled and promised and propagandized.  In 1913, the 16th Amendment was adopted:

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 amendment only redefined Income Tax as not-a-direct-tax.  Many problems are in our current Income tax:

  • Certain income is preferred, the product of crony capitalism and social engineering
  • The rates go up the more income, reducing the incentive to produce more
  • Additional income is funneled into government-preferred endeavors (see above regarding social engineering)
  • Production is reduced and therfore
  • Wealth is reduced.
  • The government controls all and becomes the Father of us all.

Getting rid of the income tax is intellectually simple but politically difficult:

Amendment XX: The 16th Article of amendment to this Constitution is repealed. 

Politically, that will require turning the current power structure of out General Government upside down.

Turning the Government upside down is the next blog …

© 2016 John Chambers