The View From 1776

Federal Bureaucracy: Too Big To Fail

Can political liberty survive the aggressive growth of collectivist government?

Posted by .(JavaScript must be enabled to view this email address) on 07/24 at 08:04 PM
  1. Thomas,

    I have but one minor quibble to make with your recounting of progressivism wherein you wrote “Ratification of the 16th Amendment in Wilson’s first year in office established Congress’s power to levy income taxes.

    While technically correct, this is somewhat misleading in that the 16th Amendment was passed and ratified prior to Wilson’s first inauguration; and was not, in fact, necessary to tax individuals. Yes, Wilson and his election were part of the stumping for the amendment, but it cannot be said they were the actual authors or prime movers of this particular atrocity.

    Article I, Section 2, paragraph 3 of the Constitution says “Representatives and direct taxes shall be apportioned among the several States … according to their respective numbers, which shall be determined by adding to the whole number of free persons, including those bound to service for a term of years, and excluding Indians not taxed, three fifths of all other persons [i.e., slaves]. ” Article I, Section 8, paragraph 1 says “The Congress shall have power to lay and collect taxes …” And, Article I, Section 9, paragraph 4 says “No capitation, or other direct tax shall be laid, unless in proportion to the Census or enumeration herein before directed to be taken. ” Prior to the 16th Amendment, these three statements defined the Federal power to tax individuals, the only limitation being that such taxes must be apportioned according to a census to be taken each ten years (or more often).

    Amendment XVI to the Constitution reads: “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.

    So, what did this 16th Amendment actually change if Congress already had a power to tax individuals directly? Did it give Congress the power to tax income, or did it merely remove a constraint on an pre-existing but weak power already possessed. It eliminated a lone restriction on Congress tying direct taxes to a head-count. Indirectly, that made tax on income impractical rather than impossible because income is not proportional to enumeration (i.e., no income-to-population correlation exists). An apportioned direct-tax is the same (fixed amount) for a billionaire as for a chimney-sweep.

    The 16th Amendment was initially proposed and passed by non-progressive Republicans (with Democrat support) led by Norris Brown and Nelson Aldrich (both fiscally conservative Republicans; Aldrich was father-in-law to J.D. Rockefeller and grandfather to Nelson Rockefeller). Taft had on at least two occasions proposed a 2% tax on corporate incomes based on prior unchallenged law (Revenue Acts of 1861 & 1862), only to be shot down by SCOTUS (Pollock v Farmer’s Loan & Trust Co). Brown and Aldrich intended to beat the progressives at their own game by putting it to the people directly (they believed popular mistrust of government to tax directly was too strong to accept such a change) at a time when Republicans held the upper hand in Congress; only to be upset by a major shift to the Democrats in the 1912 election that swept Wilson and the progressive wing of the Democrat Party into power. There were nearly as many progressives in the Republican as Democrat Party, and those were still relatively few in either party; so it was party more than progressivism that decided the issue. Thus, it was Republicans, and not progressives (per se), who gave us this monstrosity in a fit of Machiavellian miscalculation.

    Had Brown and Aldrich stuck to founding principles and their own conservative instincts, progressives would not have had the opening in 1913 to stage an amendment as Republicans did in 1912; and would have had to mustered support against stiffly conservative opposition rallied by those same Republicans. Probably, they would have lost time and support before that came to pass. More likely, they would have attempted to pass tax laws short of an amendment to achieve the same ends (i.e., fund progressive programs).

    Prior to Pollock, it was generally believed the Constitution authorized Congress to levy taxes except on income. In fact, that was not true as two direct-tax measures had already been passed, albeit during a civil war, which roused no Constitutional angst. Yet, the only instances of direct-taxes surviving a Congressional vote were during that war. To secure ratification of the Constitution, Madison assured New York readers of his Federalist Papers, that Congress would only exercise its power to tax directly during emergencies (e.g., war, famine, &c); and that the temper of the country and form of government were such as ensured Congress would never contemplate making direct-taxes permanent. Such an emergency direct-tax was proposed by then President Madison during the War of 1812, but was quickly suppressed by a Congress unwilling to risk a popular uprising (New England just then contemplating secession). The Revenue Acts of 1861 & 1862 were, indeed, temporary measures, and were allowed to expire without opposition. This remained true until the rise of populist progressivism took hold in the closing years of the 19th century. Many times, Congress chaffed at the impediment pinning direct-taxes to the Census, and maneuvered to sidestep it long before progressives existed in large enough numbers to have had a role.

    Thus, it was popular mistrust of direct-taxes coupled to a widespread (yet mistaken) belief the Constitution barred such taxes, and not an actual restriction on the means of taxation that primarily held our federal government in check prior to progressivism; and, not progressivism that overwhelmed presumed Constitutional principle. Once that belief eroded, giving way to the idea of beneficial governance, a number of measures were put forward only to come up against that lone constraint taxes must be levied according to person and not according to each person’s ability to pay. Nothing in the Constitution suggests Congress could not tax to pave the way to populist causes; to the contrary – the revolution and ratification were themselves popular movements. Thus, the movement to eliminate that lone impediment was hatched.

    The 16th amendment does not establish a Congressional power to levy income taxes because Congress already had that power. They could do (and did) that by first apportioning the tax as a percent of all incomes, with each individual (with some exemptions) paying the same fixed tax. As such and to be practical, the percent tax levied had to be miniscule; else would bankrupt most citizens. And, because miniscule, such a poor revenue stream and unpopular, few Congressmen would support such a tax. What the amendment did do was transform the power to tax income without regard to apportionment, freeing Congress to raise the tax rates on income to something worth pursuing despite the obvious political risk. Once the impediment was removed, it was a simple matter of convincing Americans taxes are necessary, even beneficial; and, as we know, that is a matter of enough giving enough voters ‘free stuff’ paid for out of our own pockets they (the free-loaders) stop worrying where it is coming from.
    Posted by .(JavaScript must be enabled to view this email address)  on  07/27  at  12:21 PM
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