Why Not Repeal the 16th Amendment First?
A reader writes:
Would you do us the favor of responding to some of the criticisms of the Fair Tax that have come up on our message board at Protest Warrior. No one really seems to be able to come up with the answers to some of these puzzles. If you can’t do all that, can you answer me these two questions:
“Why does the FairTax Bill only suggest the repeal of the 16th Amendment, and not simply demand it before it can be passed? No one wants to be saddled with an income tax and national retail sales tax.”
“If K street can no longer lobby the Congress Ways and Means Committee for exemptions within the Tax Code, would they simply shift their efforts on to the HHS which sets ‘prebate’ levels?”
I’ll give you the link to one of the larger discussions on the FairTax we’ve had: link
Try and read through the whole thing, some of the concerns of the initial poster are addressed further along, and others are raised as well.
Thanks for the site, it is well written and one of the best sites for FairTax info.
I prefer to contribute to a central repository of information about the FairTax, like this one — so I’ll take up your two questions here. Regarding the first:
“Why does the FairTax Bill only suggest the repeal of the 16th Amendment, and not simply demand it before it can be passed? No one wants to be saddled with an income tax and national retail sales tax.”
I don’t know for certain how Senator Linder (who wrote the bill) would answer this question, but I suspect his answer would include at least some of the following points....
Demanding the repeal of the 16th Amendment, before cultivating adequately broad-based support for an alternative form of government revenue, would be politically unfeasible.
Remember, the current income tax system gives politicians, and the interest groups that support them, a tremendous amount of political power. Any major change to this tax structure — such as eliminating the income tax and abolishing the IRS — would require massive public support in order to be passed. So massive, in fact, that the phrase “public support” might be a misnomer; it might require, in Rush Limbaugh’s words, a total revolt.
We are far more likely to inspire broad-based support for such action, and actually succeed with it, if we don’t try something wacky — such as, say, demanding the removal of the government’s current source of funding before a new one has been demonstrated politically viable.
And so the burden falls on FairTax supporters to first show that such broad-based support exists in America. Once that is in place, then Congressman Linder and his co-sponsors in Congress would have adequate clout to pass the FairTax legislation and then (but only then) move to repeal the 16th Amendment.
Recall that Congress alone cannot repeal the 16th Amendment. Amending (or repealing an amendment to) the U.S. Constitution requires support by the legislatures of three-fourths of the U.S. states. There is no possibility that this could be accomplished, in today’s world, without having its successor in place beforehand.
Is there some chance it could all backfire, and we could end up with both an income tax and a sales tax? Probably. But how would you like to be a politician up for re-election after that happens? ...After the American public has shown its clear preference for a sales tax instead of, not on top of, an income tax?
Despite my own general optimism, perhaps it is an open question, whether the FairTax will generate enough support among Americans to make its way through Congress. If, however, Americans do show enough support to pass the legislation — which would be one hell of a lot of support — it strikes me as unlikely in the extreme that those same adamant taxpayers who pushed for tax reform would settle for having both a federal income tax and a federal sales tax.
I just don’t see how it could happen — how you could have an inspired national movement for tax reform, sufficient to pass legislation to abolish the IRS, and yet ultimately end up with the opposite of what those same influential Americans worked towards, which is the elimination of the federal income tax. If that happened, I think you would start seeing some politicans running for their life, instead of running for reelection.
So although I’m sympathetic to this question — “Why don’t we just repeal the 16th Amendment first?” — I think it’s somewhat politically naive. Our first task is to demonstrate broad-based support for a consumption tax in lieu of the income tax. Then we can aim that same well-backed battering ram at the repeal of the 16th Amendment.
Given the nature of the obstacles we face at each step, it strikes me as much more likely that the FairTax would never make it through Congress, than make it through Congress and yet land on top of the income tax rather than replace it.
On to your second question:
“If K street can no longer lobby the Congress Ways and Means Committee for exemptions within the Tax Code, would they simply shift their efforts on to the HHS which sets ‘prebate’ levels?”
Probably. And over time — inevitably.
But if we generate sufficient political support to repeal the 16th Amendment, I think politicians, on whom K Street lobbyists depend for their effectiveness, would be very reluctant for a few years to touch the “new” third rail in politics, which would be the tax code.
In the modern age, a decade or two of tax sanity is the best anyone could possibly hope for. After that, it’s up to a new generation of activists — just like it is up to us, today — to work for what they believe is right.
All of this comes back to one simple truth.... If you think the FairTax is a good idea — if you agree that it would move America in a stronger and healthier direction — then there is only one course of action: Ask your friends to buy The FairTax Book — or buy it for them. Ask them to sign the petition. And then encourage them to do the same with their own friends.
If you are serious about helping make the FairTax a reality, never lose sight of the fact that its fate is ultimately dependent on the sheer quantity of public support.
Arguing on internet discussion forums about the finer points of tax reform can be useful for sharpening your chops, and testing your own ability to understand and explain the plan, but it’s unlikely to actually generate much public support.
To do that, a far better strategy is to talk to your friends and relatives, and to let the FairTax Book do most of the selling. The book seems to be a remarkably effective tool at turning everday Americans on to the value of the FairTax.
Thanks for responding to my e-mail on the site, I’m flattered. I can certainly understand the political naïveté that my first question would suggest, but perhaps I can more clearly state my concern here. The original poster of the thread (bgmacaw) probably said it best:
2. The likelihood of ending up with both FairTax and income tax — FairTax can be passed by a simple majority of both houses of Congress plus the President’s signature. However, the repeal of the 16th Amendment, which authorizes the income tax, requires a much more demanding 2/3 vote in each house and then approval by 3/4 of state legislatures. The likelihood of ending up with both the 23% federal sales tax and some form of income tax is greater than supporters indicate. Also, even in the unlikely event of a 16th ammendment repeal, Congress still will have the authority to impose various excise taxes and so forth that will be used to make up any shortfalls in the sales tax and these taxes are likely to be more burdensome to the economy than current income taxes.
You have answered my question (to my satisfaction, I might I add), but I can still think out an objection based on yet another scenario: The picture you paint is of a national groundswell of public support — and to be honest that is the most likely way that this will happen– but in the unlikely event of the FairTax bill passing in Congress without convincing a truly overwhelming majority of Americans, I can certainly see this happening.
p.s. You said “I prefer to contribute to a central repository of information about the FairTax, like this one — so I’ll take up your two questions here.” I prefer that as well, I didn’t mean (though my initial e-mail wasn’t clear enough on this) for you to sign up to the Protest Warrior message board and join our debate, but for you to respond to the objections raised in the thread here on this site.
You’ll have to read through the thread to see what our concerns are (or I’ll do my best to transcribe them into question form and submit them here). We are a site full of conservatives, Republicans, Libertarians, and just generally America supporters. The objections we raise on the boards, I feel, are likely to be the most common or prickly ones for the average, well-informed American.
I’ll try again to get a few more of our concerns to you so you can help us knock them down.
p.p.s Do tags work here? I guess I’ll find out. [HTML tags do, but not the other stuff. I’ve fixed your tags above. –Ed.]
Nesta, it sounds like we’re agreed that the best way to proceed (and probably the only way to proceed) is to ensure that there is a broad groundswell of support for the FairTax. I actually don’t see how Congress would ever pass the FairTax without it.
Bgmacaw’s objection seems predicated on the possibility that Congress might just whimsically decide to pass the FairTax. But there is absolutely no chance of this happening.
In Boortz’s words, “Passage of the FairTax would constitute the greatest transfer of power from government to the people since the Revolutionary War.” As a rule, politicians don’t give up power this way until the public absolutely demands it.
Title 1 of H.R. 25 does repeal income, payroll, estate, and gift taxes. Title II then replaces Subtitle A of the Internal Revenue Code with a sales tax. H.R. 25, under the authority of congress, does repeal income tax. It does not, however, repeal the right of congress to levy income taxes. The congress does not have the authority to change rights provided by the constitution. While congress can initiate such a constitutional change, the ultimate authority requires support from 38 of the state legislatures. Such a constitutional change is a longer process. In fact, the 16th Amendment took 4 years to pass. A 1909 tariff bill included the proposed constitutional amendment—ratification did not occur until 1913. FYI: the following is the amendment in question:
Amendment XVI
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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.
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H.R. 25 builds the bridge for tax reform. Once we cross that bridge, our grass roots movement will be needed to burn it to prevent any future utilization by congress. We will need to take this second action at the appropriate time.
The original provisions for funding the federal government were replaced by the 16th Amendment.
The funding for the federal government was to be provided by the states. This was specified in the articals of the constitution. The founding fathers were emphatic about the limiting the power of the federal government.
It was the 16th amendment to the constitiution that allowed the federal government to bypass the states and tax the individual.
The 16th amendment to the constitution changed the way the federal government was to be funded. The 16th amendment rewrote the articals of the constution that specified how the federal government was to be funded.
The Artical provided funding of the federal government by placing a fee on the states. That fee was based on the population of that state.
The 16th amendment eliminated that artical and replaced it with the taxation of the individual.
I’m replying to this website because it is supporting a transfer of the current system to another system and it has not considered the original intent of the founding fathers.
The federal government should be the last entity in the tax chain. The local government should be the first, the state should get the next, and the federal government should get the least.
A federal government governed by the 10th amendment should have the least amount of influence over the individual. That was the intent of the founding fathers.
The idea that repealing the 16th amendment would leave a gaping hole in the funding process is fiction. The repeal of the 16th amendment would only return us to the original intent of the founding fathers.
The federal government would be funded by the states based on population.
There is already a replacement for the repeal of the 16th amendment. All we have to do is repeal the 16th amendment.
I’m glad to see this here. I have put a link to my blog article outlining a similar plan that was independently constructed.
The question is how to move closer to a repeal of the 16ht Amendment. This post was in 2005. We aren’t any closer. We need outlined plan to move this forward and money to make it happen.
I agree that a formal plan needs to be developed by a citizens group that will move to educate the public about the possibility of repealing the 16th amendment, and outling a plan that will move the populas ...citizens of each state to work towards this goal.
I can’t see how the original amendment was passed by 3/4 of the states...when in essence they were agreeing to have their pesonal income taxed. How could any clear thinking persons actually agree to that?? Something had to be amiss in that approval process.
The possibility of a national citizen uprising whose purpose it is to repeal the 16th needs to be hammered into the public. Like all the junk emails that we get on a continuos basis...this message can get out through on the internet...and all interested parties need to be funneled to one site through which they can begin to organize.
These idiots in congress have saddled us and our children with a tremendous debt, which is almost unpayable. It is now time to take te bull by the horns and get their hands out of the pockets of the working classes
As a note, The Fair Tax Act of 2009’s last section deals with the elimination of the FairTax if the 16th Amendment isn’t repealed in 7 years.
It is time for someone to start a listing of voters who want to repeal the 16th amendment.
The 16th amendment does not create new federal taxation avenues as commonly thought. The federal government is still limited to the provisions in Article 1 sections 8&9 of the Constitution. Article 1 section 8 decribes what the federal government can do to raise taxes with excise and other indirect taxes. Section 9 decribes what the federal government cannot do to raise taxes, which is to lay taxes directly upon the citizen.
We do not need to waste our time and energy repealing the 16th amendment if we want the end the income tax. All we need to do is to expose the truth of how the current income tax evolved into it’s current form. Once it becomes common knowledge that declaring private sector earnings as taxable income is voluntary, how many people will continue to do so?
While I’m not sure that I disagree with the argument, the courts have already ruled on these points and consider them frivolous. Not sure you’ll get too far with it - likely prison.
Actually the Justice department is refusing to back the IRS injunctions on these so called frivolous taxpayer actions. If you file the proper forms and enter correct information under the law the IRS must refund the overpayment. The IRS can only assess tax upon the the taxable income declared on the required reporting forms (W-2 and 1040). If you have no received no profit (priviledge) as a result of direct connection to the federal government as described in the IRC you have no taxable income. If you do accept that your private sector earnings are taxable income and declare them so you are doing it voluntarily. You are only required to report your true taxable income.
We certainly need to repeal the 16th and 17th amendments to the constitution. This is what we should push for. This would remove Tyranical power from Washington. To replace it with any other tax would be to replace the Tyranny. State and local government should be in control of what funding Washington receives. And the people should be in control of state and local government. It is time to return to the origins of the constitution on fiscal policy. We must stop our federal government from creating any more economic trainwrecks.
Patrick,
Good luck with that. I don’t know what direct elections of Senators has to do with taxation. If you are really trying to stop taxation upon income by the federal government repealing the 16th amendment is a waste of time and effort. After the Pollock ruling that struck down sections of the Income Tax Act of 1894 that related to property, the income tax was still in force. Individuals and businesses were still required to pay income tax and have been since. The 16th amendment did not change the ability of congress to levy taxes on income, it always has had that power. It only removed the source problem that Pollock uncovered. We now call profits from real or personal property capital gains. If you want that to go away too, repealling the 16th amendment would work for as long it would take congress to pass a new capital gains tax. Less than a year would be my guess. It’s just not worth the effort.
I realize this will not be a popular idea on this site, but I am more and more convinced that we need a national consumption tax as well as an income tax.
In Europe, almost every country has a Value Added Tax (which is a consumptiion tax, but more efficient than the FairTax). They also have personal income taxes, corporate income taxes and social security taxes.
In other words, the VATs do not generate enough income to replace the other taxes (and neither would the FairTax). However, the countries are able to supplement or reduce their income taxes with the VAT. If we adopted the FairTax (at a reduced rate with no prebate), we could reduce and simpify our income taxes. I think that would be a very good thing.
RM,
Where are you getting your information on the income tax? I find no indication that any federal income tax existed between 1896 and 1913. While the Pollock case, did only specifically address certain portions of Income Tax Act of 1894, it overturned the entire act. Further, it over turned previous precedence set in the last income tax case (Springer v. US, 1880).
From what I’ve read, they didn’t address the other forms of taxation, e.g. salaries, gifts, etc. although prompted to by the plaintiffs. Do have contradictory information.
Here is a good site http://www.tax.org/Museum/1866-1900.htm that sums up some info. Check out 1895.
Hayden, you also have to take in to account that many of those European countries have a higher overall tax burden on their citizens. I expect their burden is too high to apply in any one tax. Perhaps we’re getting to a point where we’re in the same position. While I know you have suggested converting the payroll tax side into a sales tax, if I were to suggest a hybrid system, it would be to keep the payroll tax. I understand your reasoning on progressivity, but I hope the long term sanity of allowing a portion of SS to be placed in private accounts will take and it seems like it would be more feasible to do so from an income side.
Also, if we’re splitting hairs. FICA taxes are not technically “income taxes.” Although, from the standpoint of an employee who has the FICA taxes (both Social Security and Medicare) withheld from his or her paycheck, it might be difficult to see the difference, the FICA tax is actually not an “income tax”; it’s an “employment tax” imposed under Subtitle C of the Internal Revenue Code. By contrast, “income” taxes (individual, corporate, etc.) are imposed under Subtitle A. The estate and gift taxes are “transfer” taxes (taxes on some, but not all, transfers of ownership of property), and are imposed under Subtitle B. So perhaps it might be possible to repeal all the technical income taxes through eliminating Subtitle A, still repeal the 16th amendment (non-aggressive or reworded aggressive), and leave some portion of an employment or transfer tax... who knows. The magic would be preventing backdoor government abuse for the future.
Hayden,
While I agree that putting all the tax burden upon retail consumption is a bad idea, I disagree that we need to keep withholding income/payroll taxes on wage earners. The way I would increase revenues would be to extend the concept of taxing consumption to the capital markets as well. There is already a capital market transaction tax of .004% in place. This should be increased to .5% and applied to all capital, bond, and commodity markets. Also, keep and reform the capital gains and estate taxes to a flexible and highly progressive scale. The transaction tax could be rebated up to $500 to untax the small investor on the invertors yearly capital gains returns. Provisions could be added to exempt the household cashing in IRA’s for retirement or to fund a childs education. While reducing the rate on retail consumption to around 10%.
The income tax could be maintained but it would have to be stripped back down to reveal the real income tax, which is an excise tax levied upon anyone receiving direct privilege from the U.S. Government. The corporate officers of a company receiving contracts from the feds can and should be taxed but not their employees. The same corporate officer should not be taxed on profit from private sector earnings, only the profits received from the government. That’s the way it is really, that’s the way it needs to be enforced. Withholding is the real source of the problem and should be made illegal because it’s the real villian that turned private sector earnings into taxable income.
Andrew,
I’m not sure if the website you posted is lying or just overstating the facts but the Pollock decision clearly states that only the sections pertaining to real or personal property were nullified. In fact the IRC is still siting sections of this law in the current code in Subtitle A. Subsequent Supreme Court rulings reiterated the fact that congress has always had the authority to tax incomes under Article 1 Section 8 of the Constitution. The Pollock decision did not effect that right. An excise tax upon profits from companies receiving priviledge from the U.S. Government (income tax) was collected by the treasury during the period in question. The total revenues from these “income taxes” did drop drastictlly but not completely.
Morphh,
Technically “income taxes” as defined in Subtitle A are not income taxes either. They are excise taxes upon profits received from wages/salaries (one example). The FICA taxes are the same if definitions remain consistant. Aren’t they both taxes calculated upon the same income? Does it really matter if the label placed on the tax is an employment tax or an income tax if the tax is calculated and levied on the same earned income?
RM,
I disagree that the decision only nullifies the parts of the act that pertain to real or personal property. In fact, the following from the decision: “Third. The tax imposed by sections 27 to 37, inclusive, of the act of 1894, so far as it falls on the income of real estate, and of personal property, being a direct tax, within the meaning of the constitution, and therefore unconstitutional and void, because not apportioned according to representation, all those sections, constituting one entire scheme of taxation, are necessarily invalid.” is stating that since all those sections constitute “one entire scheme of taxation” and contain an “indisputably” unconstitutional provision of taxing income from real property, then the sections in their entirety are invalid.
In other words, the unconstitutional parts mixed with the other parts are enough to invalidate the whole thing. They did not however (although prompted by the plantiffs) rule about other forms of income, which were very much in dispute in the case. The act was also about tariffs, they kept those around. Was this excise on profits part of the act?
What are the subsequent supreme court rulings? Were they rendered prior to the 16th?
Nothing before the 16th amendment but several afterwards that upheld the constitutionality of the 16th amendment specifically site the fact that the amendment gave no new tax authority to the congress. The Supreme Court affirmed the power of congress to tax income because it always had that power under Article 1 Section 8 of the Constitution. Pollock did not effect that right only the source issue in section 27 to 37 were deemed too close to a capitation tax to be not subject to apportionment. The entire scheme was never brought into question, it couldn’t be. Pollock did not or could not amend the Constitution. Even if the entire “Income Tax Act of 1894″ were struck down as you suggest, it would not have changed anything. The previous income tax, which was not replaced by the 1894 version, was still in force and enforcable. Either way, the only effected group was those receiving profits derived from real or personal property.
Congress does not have the power to directly tax citizens of the United States, it’s prohibited under Article 1 Section 9 of the Constitution. The congress does have the power to levy indirect taxes on specific items or activities as detailed in Article 1 Section 8. These indirect taxes are most commonly excise taxes (aka priviledge taxes). They are indirect taxes because you can choose to avoid the tax by not purchasing the item or avoiding the activity. The income tax as defined in all the pertinent laws and the IRC is not a direct tax because by definition in the code, it’s an excise tax levied on the profit derived from several specific activities by narrowly defined groups. It’s not a tax levied the gross earnings of all Americans, the congress does not have that right.
RM @ 17...
Let me first of all concede my complete and utter ignorance about a “capital market transaction tax”. I really have no idea what this is, but based upon your idea of how much it would reduce the retail tax rate this sounds like it would be an enormous amount. I wonder what negative impacts this would have... Personally, I like the idea of reducing the FairTax rate and making the system more progressive by pushing more of the load onto the uber-rich.
Another point you mention is maintaining the estate tax... I’m honestly conflicted on this particular issue. First of all, I don’t like the idea about taxing the wealth accumulated over a person’s lifetime and has arguably already been taxed simply because that person dies. This just strikes me as fundamentally wrong. However, I understand that this can be helpful to progressivity. I think that there should be a pretty significant exemption on this, probably a couple million dollars, and should be some specific exemptions for things like a single family home and a single family business. This would be to prevent loss of these family assets due to the levying of an estate tax which forces the beneficiary to liquidate the asset to meet the tax obligation.
Scott,
Agreed there would need to be reform to both the capital gains and estate taxes to add flexability and make more progressive. Untaxing capital gains taken at retirement or to fund a childs education should be added. Also, a tax credit of up to $500 can be given to an investors capital gain tax to cover the transaction tax cost, untaxing the small investor.
I expect there is a difference between capital gains tax and a capital market transaction tax. I would not agree to taxing capital gains. Let people save and invest without penalty. However, I think the market itself and services rendered are within scope and could be open to compromise. As for an estate tax, this is also something I struggle with a little bit. I like the thought of incentive for those of extreme high wealth to consume a large chunk of it before they die and the prevention of dynasties. However, I also think it should be ones right to leave considerable resources to ones children if you were to pass suddenly. So this is one area that I think would need to be given a great deal of thought to make sure it only applies to extreme wealth that has been otherwise unconsumed. Perhaps giving an option to the children at that time, you get to keep 25 million tax free, anything else is taxed at 50% unless it is donated for philanthropic means that benefit society.
RM,
I’m not sure what you mean by “The entire scheme was never brought into question”, but this line “all those sections, constituting one entire scheme of taxation, are necessarily invalid.” is directly from the decision. Again, they ruled on income derived from property as being obviously direct, but did not rule on the other forms as being indirect or direct. They didn’t lay down a decision on those items.
Could you also cite the income tax you believe was in effect at the time of 1894 act (which I believe was actually billed as a tariff reduction act)? I don’t think we are using the same definition of income tax.
Morphh,
There has always been a capital markets transaction taxes but they were lowered to the current .004% in 1966. If we are moving federal taxes to the consumption side I think it’s only fair that the capital, bond, and commodity market contribute as well. This will lower pressure (and rates) on the retail markets.
Keeping the capital gains and estate taxes would include reforming them to a flexable and progressive scale. The lower end of the scale will be completely untaxed while those receiving the highest profits will pay even higher rates than today. Provisions should be added to both so that certain actions can be completely untaxed or at least a very reduced rate. Transferring a family farm or business or cashing in to fund education or retirement are examples of activities that should receive special consideration. A tax credit can be given to investors for the first $500 transactions tax paid to untax the small investor and reduce the impact of raising that tax for most others. The income tax system was not designed to tax the common citizen the very wealthy were always the target of income taxes to fund the federal government, this constitutionally based idea needs to be restored.
Andrew,
The income tax was included in several internal revenue acts from 1861 to 1864, check out the history site you gave for that period.
RM,
The civil war income tax expired in 1872.
Yes and congress reinstated it in 1894. Congress allowed it to expire in 1872 but they did not repeal it. They did not need to rewrite the entire law they only needed to reinstate the previous law and add amendments to it. These are still the base laws that the IRC is built upon. If they are all null and void then so is the IRC.
No. The civil war income tax expired. It was gone. They tried to institute another income tax, but the supreme court overruled it (based on inclusion of direct taxes). The income tax wasn’t reintroduced until 1913 after passage of the 16th amendment. Then congress got rid of the income tax and replaced it with the fairtax in 2013 (I am just assuming this part).
The Bush tax cuts expire in 2010. If after that date congress wishes to reinstate those rates, they will write new law. It doesn’t matter if they reference previous acts, but what makes you think they referenced the civil war income tax in the 1894 act?
That’s just not possible. In 1909 the congress passed the base law for the 16th amendment but only to address the source issues brought up by the Pollock decision. The 16th amendment created no new revenue laws, the Supreme Court has affirmed this over and over since 1913. Congress did not create any new revenue laws but was still able to collect the taxes. How was this possible without valid laws in place? The current Internal Revenue Code uses these laws as the legal base of the code. Where else does the revenue laws exist?
RM,
The 1909 Revenue Act created an excise tax on corporate profit (specifically not called an income tax in order to avoid a constitutional challenge). It was only for corporations, not individuals.
After passage of the 16th, they did create new revenue laws. They were created specifically with the Revenue Act of 1913. This very act re-introduced the concept of personal income taxation.
No. The 1909 act didn’t address the source issues. It didn’t address personal income taxation at all. It only added a corporate “excise” tax (from the “income” tax side. It mainly addressed tariff schedules). The 16th amendment was created, so that the Revenue Act of 1913 could include a progressive personal income tax and survive constitutional scrutiny.
“The 16th amendment created no new revenue laws, the Supreme Court has affirmed this over and over since 1913.” I am not sure what this statement is supposed to mean, but amendments don’t create laws. Laws are created by bills. The creation of the 16th amendment did specifically allow for a personal income tax, when before its constitutionality was questionable.
Where in the IRC is the Revenue Act of 1913 referenced? I find only references to the Income Act of 1894 and the previous 1864 laws when defining taxable income for individuals or business. Why is that still in the IRC if it’s not valid?
I’m not sure what reference you are referring to. If it references the 1894 act (for income taxation) it can only do so because of the 16th amendment (because Pollock through that part out). Can you cite the section that makes this reference? Is it in the text of the code, or you referring to something that points out authorizing laws?
This discussion has seemed to bog down in semantics, my basic point is: There was no income tax between 1872 and 1913. The 1894 income tax provisions were thrown out by the supreme court. The closest thing was the 1909 corporate income “excise” tax that was purposely not called an income tax.
Yes you are right because the income tax is defined in the IRC as an excise tax on profits from activities of “employees” that produce taxable wages/salaries. This excise tax on profits is what most people call income tax and these definitions used in the original 1861 to 1864 versions were never changed, they are still in force in the current IRC. So, if you use the argument that the excise tax of 1909 was not really an income tax, then the current ‘Income Tax’ is not really a income tax either. The point I’ve been trying to make all along.
It was in the authorizing laws but I don’t have the actual locations with me (at work) but will post when I get home tonight.
I’ll stand by the statement that the intent of the 1909 law was that the excise tax not be considered an income tax specifically to weaken constitutional challenges.
Even if one considers the income tax an excise tax doesn’t mean all excise taxes are income taxes (after all, you must consider the gasoline tax an excise tax, but I’m sure you don’t consider it an income tax). However, I’ll concede the difference is for political technicalities, but that’s how court challenges will be handled (along with legal reasoning. Although I’m not sure which will get the higher priority). Therefore, the distinction is important.
Of course, I never implied that all excise taxes are income taxes. However, all the taxes we call “income taxes” are in reality excise taxes on profits received, not taxes on earnings (incomes could not be used here because the IRC defines the term differently than commonly understood). This is extremely important because excise taxes are by definition priviledge taxes. The IRC is very specific how this priviledge is attached to some profits and not so clear on others.
Despite what some may think here, excise taxes are not income taxes. While Income taxes are based on what you earn, excise taxes are items such as tobacco, liquor, guns, gasoline and perhaps soft drinks like Pepsi or Coke. But I must ask one question: Has there been a flat tax since 1861, or is it newer than that? Another question I have is this: Can we have a flat tax in the United States without the 16th Amendment, or is that something that conservatives and libertarians are trying to get away from?
Mr. Porter
Actually, your are both right and wrong. Excise taxes are commonly applied to specific products as allowed in Article 1 Section 8. However, income taxes are not taxes levied upon your income. Income taxes are excise taxes levied upon profits generated from specific sources of earnings. And I agree a flat tax directly levied upon incomes would not pass the prohibitions against direct taxation as outlined in Article 1 Section 9 of the US Constitution.