American History of Direct Taxation

By KrisAnne Hall, JD

During the American “Civil War,” politicians figured out a whole new source of revenue…the individual American income.  If they could pull it off, it would invariably be the most consistent revenue stream the American government had ever experienced.  All that was needed was to convince the people that this “inconvenience” was not only necessary, but limited and temporary to meet an immediate need.  Enacted in 1862, this income tax was collected with the consent of the people to fund the War, was limited by income, assessed upon those who made $600 or more a year, and would expire after a set period.

But as we have learned, a power once assumed by government is never temporary and will always increase exponentially.  In 1894 Senator John Sherman, a Republican from Ohio, argued that this “temporary” tax should be made permanent.  He argued that the mechanism of consumption taxes were not “fair” and that the burden of the debt should not rest equally upon the poor, but upon those who can afford the burden.

“A few years of further experience will convince the body of our people that a system of national taxes which rests the whole burden of taxation on consumption, and not one cent on property or income, is intrinsically unjust. . . . [T]he consumption of the rich does not bear the same relation to the consumption of the poor as the income of the one does to the wages of the other.”

The Civil War Tax would expire in 1870 as planned, but subsequent economic challenges would resurrect the drive to create a permanent income tax solution.  The People’s Party would bring the discussion back into the public arena, but it would be the Republican Party, through Presidents Roosevelt and Taft and several key Congressmen who would give this unconstitutional measure its life, with bipartisan support by the Democrat party.

In 1906 President Theodore Roosevelt stated that a “graduated income tax of the proper type would be a desirable feature of federal taxation, and it is to be hoped that one may be devised which the supreme court will declare constitutional.”  Roosevelt’s successor, William Howard Taft, also appeared to accept the constitutionality and desirability, at least in emergencies, of an income tax. In accepting the Republican nomination in 1908, Taft said, “I believe that an income tax, when the protective system of customs and the internal revenue tax shall not furnish enough for governmental needs, can and should be devised which, under the decisions of the Supreme Court, will conform to the Constitution.”

Furthermore, many Republicans had come to Congress willing to join with Democrats and any remaining Populists to push for an income tax.  Even the Republicans were trashing the consumption tax as “unfair” and pushing for a more “balanced” approach to taxation that put the burden of taxation on those who could “afford it.”

Sen. Cummins, a Republican from Iowa said,

“[A]n income tax, levied upon those who ought to bear the burdens of government, . . . will meet even that principle more perfectly than to levy duties upon things that the people must use, and impose the weight of government only by the rule of consumption.”

The question remained, would there be a tax by legislation or a tax by Constitutional Amendment?   In a full on bipartisan push for income tax, Senators Joseph W. Bailey of Texas, a Democrat, and Albert B. Cummins of Iowa, a Republican, both introduced legislation to add an income tax provision, modeled on the 1894 statute, to a tariff bill.  The supreme Court would be an insurmountable obstacle to this measure as this court had repeatedly deemed direct income tax by legislation to be unconstitutional.

President Taft weighed in with support for a constitutional amendment, stressing, among other things, the desirability of “stability of judicial construction of the Constitution.  Instrumental in the push for a Constitutional Amendment was Republican Senator Norris Brown of Nebraska. Senator Brown would bring in greater support for the Amendment by proposing the following Amendment language: “The Congress shall have power to lay and collect taxes on incomes and inheritances.”  Although many did not like the proposal it gave a starting point for real discussion.  The final push for support would come on June 16 when President Taft gave support to a constitutional amendment. The next day, June 17, with the president now on the side of a constitutional amendment, Senator Brown tried again, proposing the following language: “The Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several States according to population.”  The joint resolution containing the Amendment passed unanimously in the Senate (77- 0), and in the House a week later, after about four hours’ debate, by a vote of 318 to 14.

Let us be reminded that the initial arguments of war time necessity and temporary implementation are completely out the door.  These politicians, both Republican and Democrat, had now devised a way to direct tax the people, contrary to Article 1 section 2 clause 3 of the Constitution.  They have nullified the Constitution and ignored the supreme Court opinions declaring such acts as unconstitutional.  With no “emergency” need and no way of ending this intrusion, the only the justification behind the actions of these legislators that remains is the desire to permanently enrich the government in a way that our founders concluded to be complete despotism.

Perhaps Thomas Paine tapped into a axiomatic truth when he wrote in his Answer to Mr. Burke’s Attack on the French Revolution,

“…a bystander, not blinded by prejudice nor warped by interest, would declare that taxes were not raised to carry on wars, but that wars were raised to carry on taxes.”

Article 1 section 2 clause 3 establishes that all taxation must be collected by direct apportionment to the States through a census of the population.

“Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers… The actual Enumeration shall be made within three Years after the first Meeting of the Congress of the United States, and within every subsequent Term of ten Years, in such Manner as they shall by Law direct.”

This section of the Constitution secured to the people the ultimate power and protection against an unlimited central government by putting the States in control of the federal purse through the consent of the people.  Government is easier controlled at the local level.  James Madison, the Father of our Constitution, reminded the Constitutional delegates in 1788, the power of the purse is historically the “most effectual” and complete power of the people to control government.  Therefore, keeping that essential power at the State level gave the people greater control to prevent misappropriation of funds on the federal level.

“This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure… finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government.” Fed #58

Thanks to a bipartisan move, endorsed and encouraged by two Republican Presidents and Republican Congressmen, this essential check and balance was stripped from the people, creating an uncontrollable central government limited only by its own whims and desires.

The history of our independence from Great Britain proves this essential truth; taxation was to be left to the control of the people.  Our founders saw the power to tax as a direct and unlimited power to oppress.

“But if our Trade may be taxed why not our Lands?  Why not the Produce of our Lands and every thing we possess or make use of? This we apprehend annihilates our Charter Right to govern and tax ourselves…are we not reduced from the Character of free Subjects to the miserable State of tributary slaves?”  Samuel Adams May 15, 1764

Adams knew an axiomatic truth:  if the central government could assume the power to lay taxes on whatever they choose, they would soon over take the common Rights of the people, thus creating an unlimited government, and subjecting the people to complete despotism.  The designers of our Constitutional Republic wanted to ensure that this history would not repeat in the new, independent America.   They knew that if the central government could take money directly from our pockets, not only would we have no immediate recourse but it would be theft.  Therefore it is ridiculous to even assert that our founders would have endorsed or even tolerated our current form of income tax.

“I think the Parliament of Great Britain hath no more Right to put their hands into my Pocket, without my consent, than I have to put my hands into your’s, for money…”  George Washington

It is only through this direct theft that our current government has been able to grow exponentially.  If the people were still in control of taxation through the protective mechanism of apportionment to the States there would be no funding for the multitude of federal offices that plague the Liberties of the People.  The States would naturally refuse to supply the federal government with the money demanded for services that are not authorized by the Constitution.  This was to serve as the ultimate check and balance on federal power.

“when all government, domestic and foreign, in little as in great things, shall be drawn to Washington as the centre of all power, it will render powerless the checks provided of one government on another…If the States look with apathy on this silent descent of their government into the gulf which is to swallow all, we have only to weep over the human character formed uncontrollable but by a rod of iron…” Thomas Jefferson

Thomas Jefferson also knew the power to control the purse of government was an essential Right of the people and continually asserted that a refusal to pay taxes was not treason or sedition but a mechanism of petitioning the government for a redress of grievances.

“That this privilege of giving or of withholding our monies, is an important barrier against the undue exertion of prerogative, which if left altogether without control, may be exercised to our great oppression; and all history shews how efficacious is its intercession from redress of grievances, and re-establishment of rights, and how improvident it would be to part with so powerful a mediator.”  Thomas Jefferson to Lord North 1775

Since we have failed to teach the facts that led to our independence from Great Britain, the American people have been brainwashed into believing that income tax is actually “fair” when the complete opposite is true.  It is because of the established income tax and the inability of the people to remove their consent to spending that we have the overgrowth in government that we have.  James Madison has explained that this power in the hands of the people is to ultimately and “finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government.” Fed #58

Our designers of our Constitutional Republic were no strangers to government overgrowth, the Declaration of Independence lists government overgrowth as a symptom of “complete despotism.”

“He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.”

It is absurd to assert that these people would seek to remedy a problem that required the most drastic measure of separation from their government by creating the opportunity for their newly designed government to exercise a power they deemed despotic!