Income Taxes

                The topic of discussion for this Constitution Monday comes from the Sixteenth Amendment to the Constitution of the United States:  “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.”  This amendment gave authority to the federal government to collect income taxes.         This amendment passed and was ratified in spite of Article I, section 2, clause 3:  [“Representatives and direct Taxes shall be apportioned among the several States which may be included within the Union, according to their respective Numbers....”   

                W. Cleon Skousen explained that the “Founding Fathers had rejected income taxes and any other direct taxes unless they were apportioned to each state according to population.  Nevertheless, a direct tax on incomes was levied during the Civil war and upheld by the Supreme Court on somewhat tenuous grounds.  When another income tax law was enacted in 1893, the Supreme Court found it unconstitutional.  After reviewing the two Pollock cases in 1895, the court declared that the act violated Article I, section 9 of the Constitution. [“No Capitation, or other direct, Tax shall be laid….”] Therefore, the collection of income taxes had to be suspended.

                “During the following decade, however, the complexion of the court changed somewhat and so did public sentiment.  There was great social unrest and the idea of a tax to `soak the rich’ began to take root among liberals in both major parties.  Several times the Democrats introduced bills to provide a tax on higher incomes, but each time the conservative branch of the Republican party killed it in the Senate.  The Democrats used this as evidence that the Republican were the `party of the rich’ and should be thrown out of power.  This forced President Taft to acknowledge in political speeches that income taxes might be all right `in principle,’ but it was well known among his close associates that he was strongly opposed to such a tax.”

                Skousen explained that conservative Democrats tried to push through a bill authorizing income taxes in an effort to embarrass the Republicans; they were “caught off guard” when President Taft sent a message to Congress on June 16, 1909, “recommending the passage of a constitutional amendment to legalize federal income tax legislation.”  The Republican leadership did not expect such an amendment to be ratified, but “state after state ratified this `soak the rich’ amendment, until it went into full force and effect on February 12, 1913.”

                Skousen further explained that the “cute little monkey” of “merely 1% tax on the first $20,000 of taxable income to only 7 percent on incomes above $500,000” grew into the “gorilla” we know today.  He further explained how the nation’s fiscal sanity can be restored:  1. Pass the Balanced Budget Amendment, which would outlaw deficit spending in peacetime.  2. Pass a `Sunset Law,’ which would eliminate every government agency or federal expenditure which exists outside the Constitution and cannot survive an amendment to justify its continuance.

3. Pass a fiscal reform amendment which would henceforth raise required revenue indirectly by a consumer tax (federal sales tax), and simultaneously repeal the Sixteenth Amendment.”  (See The Making of America – The Substance and Meaning of the Constitution, 738-743.)

                I can support the first two suggestions made by Skousen but not the third one.  I like the idea of repealing the Sixteenth Amendment, but I can visualize the feds continually increasing the amount of sales tax.  I prefer a flat tax where every income earner pays a certain percentage of their income:  those who have small incomes would pay little taxes while those who earn big incomes would pay massive taxes.  If God can run His kingdom on ten percent tithing, our government should be able to run on ten percent taxes.  If it cannot, the government is too large.    

                Erik M. Jensen of the Heritage Foundation further explained, “The Sixteenth Amendment, approved by Congress in 1909 and ratified in 1913, made it possible for Congress to enact an income tax without having to worry about whether, under the rules applicable to direct taxes, the tax had to be apportioned among the states on the basis of population.

                “Congress has the `power to lay and collect taxes,’ including an income tax, but, under two constitutional provisions (see Article I, Section 2, Clause 3; Article I, Section 9, Clause 4), direct taxes must be apportioned – a difficult requirement to satisfy.  If an income tax is subject to apportionment, a state with one-tenth the national population, for example, has to bear one-tenth the aggregate tax liability, regardless of the state’s financial condition.  Suppose the populations of Iowa and Maine were equal, but Iowa’s per capita income were twice Maine’s.  The rates for an apportioned income tax would have to be twice as high in Maine, the poorer state, as in Iowa.  Such geographic variability makes it difficult, if not impossible, for anyone in Congress to support that kind of tax.”  (See The Heritage Guide to the Constitution, 411,)

                I do not like the idea of taxes being apportioned according to population.  It does not take a genius to figure out that people today would move to a different state in order to pay less income tax on their earnings.  The amount of individual taxes would continue to increase with the lessening numbers of population and would eventually become unbearable.