|
|
VISIONS OF PROGRESS: HENRY GEORGE VS. JANE JACOBS
Visions of Progress: Henry George vs. Jane Jacobs
Or, Would You Rather Live in Georgetown or Jacobsville?
JANUARY 22, 2015 by SANDY IKEDA
Henry George and Jane Jacobs each have an enthusiastic following today, including, I’m sure, some readers of The Freeman.
For those who might not know, Henry George is the late-19th-century American intellectual best known for his proposal of a “single tax” from which he believed the government could finance all its projects. He advocated eliminating all taxes except that on the rent of the unimproved portion of land. He viewed that rent as unjust and solely the result of general economic progress unrelated to the actions of landowners.
Jane Jacobs, writing about one hundred years later, is an American intellectual best known for her harsh and incisive criticism of the heavy-handed urban planning of her day. She advised ambitious urban planners to first understand the microfoundations of urban processes — street life, social networks, entrepreneurship — before trying to impose their visions of an ideal city.
Much has been written, pro and con, on George’s single tax and also on Jacobs’s battles with planners the likes of Robert Moses, and if you’re interested in those issues you can start with the links provided in this article. Here I would like to contrast their views on the nature of economic progress and the significance of cities in that progress.
Some interesting parallels
There are some interesting parallels between George and Jacobs.
Both were public intellectuals who rebelled against mainstream economic thinking — for George it was classical economics, for Jacobs neoclassical economics. Both had a firm grasp of how markets work, were critical of crony capitalism, and concerned with the problems of “the common man.” And both established their reputations outside of academia.
George was a strong advocate for free trade and an opponent of protectionism. He also understood Adam Smith’s explanation of the invisible hand. As George writes in his Science of Political Economy, “To find a fully civilized people we must find a people among whom exchange or trade is absolutely free, and has reached the fullest development to which human desires can carry it. There is, as yet, unfortunately, no such people.”
Similarly, Jacobs understood how spontaneous social processes solve the problem of dispersed local knowledge and how ordinary people can successfully cope with most of their own problems.
But there are, as I see it, at least two areas where they fundamentally differ. Those differences echo those we see today between current mainstream economics and the economics of Mises and Hayek.
The nature of progress and poverty
Although George criticized many aspects of classical economics (for example, the wage–fund doctrine), he held two important ideas that often characterize that school of thought. The first is that market competition and private property (with the notable exception of land) keep things fair and orderly, which accounts for his favorable attitude toward free trade. The second is that there is a logic to competition that pushes the economy relentlessly forward and against which ordinary people are mostly powerless. That is where he differs considerably from Jacobs.
David Ricardo, an outstanding figure of the classical school whose theory of land-rent George borrowed from heavily, argued that in a competitive market system population growth will put ever-greater pressure on farmers to bring land under cultivation that is less and less fertile. That, in turn, lowers land productivity, raises food prices, and drives wages down to subsistence level. In the meantime, rent on the more fertile land (marginal land earns no rent) rises inexorably. At subsistence wages, population growth ceases, profits shrink, and the economic system reaches a “stationary state,” which innovation may temporarily forestall but cannot prevent. Pretty bleak!
George therefore advocated a single, confiscatory tax on land because he felt that the owners of land, by virtue of their monopoly ownership, enjoy predictably rising rents without engaging in productive activity. Much as some popular economists today believe that capital automatically earns a return to those rich enough to accumulate it and so may be taxed without ill effect, George believed that taxing the “unearned” portion of land rent would not only be just but could resolve poverty and a myriad of other social and fiscal problems.
George wrote most of his most important economic tracts in the 1870s and 1880s, about the same time that classical economics was beginning to wane. Broadly speaking, one way of looking at the project of classical economics (including much of Karl Marx’s economics) is through its concern with large societal forces — for example, Malthus’s population doctrine, Ricardo’s stationary state, and Marx’s material forces of history — against which individuals’ efforts were ineffectual.
That outlook began to change in the early 20th century, when economic theorists shifted focus toward the individual’s perceptions and expectations and how they interact with other people’s perceptions and expectations to generate patterns and outcomes that are typically (though not always) benign. Theorists also asked how that order happens even though no one either intends it or has sufficient knowledge to achieve it even if they did intend it. The answer, at least to the likes of Ludwig von Mises, F.A. Hayek, and Israel Kirzner, is that the economic system has to be congenial to trial and error such that the beneficial and orderly consequences of success stay ahead of the costly and chaotic consequences of error.
Enter Jane Jacobs
In her Economy of Cities, Jacobs makes the startling claim that “poverty has no causes. Only prosperity has causes.” In other words, poverty is the default condition of humankind; it is what happens when there is no progress. For Jacobs, the main drivers of prosperity are individual innovators. Innovation is messy because what innovation depends on — trial and error — is messy and seemingly chaotic. Yet, innovation results when resourceful and imaginative people gather the diverse inputs they need to try to do something different. Progress is not inevitable, but in the right environment it has happened and can continue to happen. For Jacobs, that environment is a living city.
A city that brings people with diverse knowledge, skills, and tastes together in proximity enables the kind of experimentation needed for innovation. If knowledge were perfect, we wouldn’t need to experiment. True, great cities are consequently places of inequality, noise, congestion, and disease, which is the negative side of ambitious people seeking to better their situations. But history shows that when the environment is right — when the rules of the game are right — the positives tend to outweigh the negatives, although sometimes just barely. Which is why Jacobs praised the inefficiency of cities:
I propose to argue that these grave and real deficiencies are necessary to economic development and thus are exactly what make cities uniquely valuable to economic life. By this, I do not mean that cities are economically valuable in spite of their inefficiency and impracticality but rather because they are inefficient and impractical.
That understanding of the nature of social processes in the presence of imperfectly informed but alert and resourceful individuals places Jacobs squarely on the same side of economic theory as Mises, Hayek, and Kirzner.
George wrote about progress, of course, but he didn’t seem to appreciate, as Jacobs did, the microfoundations of that progress. It’s not surprising, then, that he disparaged great cities, approvingly quoting William Cobbett, who famously described 19th-century London as a Great Wen. Apparently, George didn’t appreciate that many of the considerable vices of cities are the price of the very progress that he cherished, a price that growing millions worldwide have been and are still willing to pay, both to move to large urban centers and to stay in them.
http://fee.org/freeman/detail/visions-of-progress-henry-george-vs-jane-jacobs?utm_source=Foundation+for+Economic+Education+Current+Contacts&utm_campaign=062ace3858-In_Brief_1_22_2015&utm_medium=email&utm_term=0_77ef1bd48e-062ace3858-14101597
Or, Would You Rather Live in Georgetown or Jacobsville?
JANUARY 22, 2015 by SANDY IKEDA
Henry George and Jane Jacobs each have an enthusiastic following today, including, I’m sure, some readers of The Freeman.
For those who might not know, Henry George is the late-19th-century American intellectual best known for his proposal of a “single tax” from which he believed the government could finance all its projects. He advocated eliminating all taxes except that on the rent of the unimproved portion of land. He viewed that rent as unjust and solely the result of general economic progress unrelated to the actions of landowners.
Jane Jacobs, writing about one hundred years later, is an American intellectual best known for her harsh and incisive criticism of the heavy-handed urban planning of her day. She advised ambitious urban planners to first understand the microfoundations of urban processes — street life, social networks, entrepreneurship — before trying to impose their visions of an ideal city.
Much has been written, pro and con, on George’s single tax and also on Jacobs’s battles with planners the likes of Robert Moses, and if you’re interested in those issues you can start with the links provided in this article. Here I would like to contrast their views on the nature of economic progress and the significance of cities in that progress.
Some interesting parallels
There are some interesting parallels between George and Jacobs.
Both were public intellectuals who rebelled against mainstream economic thinking — for George it was classical economics, for Jacobs neoclassical economics. Both had a firm grasp of how markets work, were critical of crony capitalism, and concerned with the problems of “the common man.” And both established their reputations outside of academia.
George was a strong advocate for free trade and an opponent of protectionism. He also understood Adam Smith’s explanation of the invisible hand. As George writes in his Science of Political Economy, “To find a fully civilized people we must find a people among whom exchange or trade is absolutely free, and has reached the fullest development to which human desires can carry it. There is, as yet, unfortunately, no such people.”
Similarly, Jacobs understood how spontaneous social processes solve the problem of dispersed local knowledge and how ordinary people can successfully cope with most of their own problems.
But there are, as I see it, at least two areas where they fundamentally differ. Those differences echo those we see today between current mainstream economics and the economics of Mises and Hayek.
The nature of progress and poverty
Although George criticized many aspects of classical economics (for example, the wage–fund doctrine), he held two important ideas that often characterize that school of thought. The first is that market competition and private property (with the notable exception of land) keep things fair and orderly, which accounts for his favorable attitude toward free trade. The second is that there is a logic to competition that pushes the economy relentlessly forward and against which ordinary people are mostly powerless. That is where he differs considerably from Jacobs.
David Ricardo, an outstanding figure of the classical school whose theory of land-rent George borrowed from heavily, argued that in a competitive market system population growth will put ever-greater pressure on farmers to bring land under cultivation that is less and less fertile. That, in turn, lowers land productivity, raises food prices, and drives wages down to subsistence level. In the meantime, rent on the more fertile land (marginal land earns no rent) rises inexorably. At subsistence wages, population growth ceases, profits shrink, and the economic system reaches a “stationary state,” which innovation may temporarily forestall but cannot prevent. Pretty bleak!
George therefore advocated a single, confiscatory tax on land because he felt that the owners of land, by virtue of their monopoly ownership, enjoy predictably rising rents without engaging in productive activity. Much as some popular economists today believe that capital automatically earns a return to those rich enough to accumulate it and so may be taxed without ill effect, George believed that taxing the “unearned” portion of land rent would not only be just but could resolve poverty and a myriad of other social and fiscal problems.
George wrote most of his most important economic tracts in the 1870s and 1880s, about the same time that classical economics was beginning to wane. Broadly speaking, one way of looking at the project of classical economics (including much of Karl Marx’s economics) is through its concern with large societal forces — for example, Malthus’s population doctrine, Ricardo’s stationary state, and Marx’s material forces of history — against which individuals’ efforts were ineffectual.
That outlook began to change in the early 20th century, when economic theorists shifted focus toward the individual’s perceptions and expectations and how they interact with other people’s perceptions and expectations to generate patterns and outcomes that are typically (though not always) benign. Theorists also asked how that order happens even though no one either intends it or has sufficient knowledge to achieve it even if they did intend it. The answer, at least to the likes of Ludwig von Mises, F.A. Hayek, and Israel Kirzner, is that the economic system has to be congenial to trial and error such that the beneficial and orderly consequences of success stay ahead of the costly and chaotic consequences of error.
Enter Jane Jacobs
In her Economy of Cities, Jacobs makes the startling claim that “poverty has no causes. Only prosperity has causes.” In other words, poverty is the default condition of humankind; it is what happens when there is no progress. For Jacobs, the main drivers of prosperity are individual innovators. Innovation is messy because what innovation depends on — trial and error — is messy and seemingly chaotic. Yet, innovation results when resourceful and imaginative people gather the diverse inputs they need to try to do something different. Progress is not inevitable, but in the right environment it has happened and can continue to happen. For Jacobs, that environment is a living city.
A city that brings people with diverse knowledge, skills, and tastes together in proximity enables the kind of experimentation needed for innovation. If knowledge were perfect, we wouldn’t need to experiment. True, great cities are consequently places of inequality, noise, congestion, and disease, which is the negative side of ambitious people seeking to better their situations. But history shows that when the environment is right — when the rules of the game are right — the positives tend to outweigh the negatives, although sometimes just barely. Which is why Jacobs praised the inefficiency of cities:
I propose to argue that these grave and real deficiencies are necessary to economic development and thus are exactly what make cities uniquely valuable to economic life. By this, I do not mean that cities are economically valuable in spite of their inefficiency and impracticality but rather because they are inefficient and impractical.
That understanding of the nature of social processes in the presence of imperfectly informed but alert and resourceful individuals places Jacobs squarely on the same side of economic theory as Mises, Hayek, and Kirzner.
George wrote about progress, of course, but he didn’t seem to appreciate, as Jacobs did, the microfoundations of that progress. It’s not surprising, then, that he disparaged great cities, approvingly quoting William Cobbett, who famously described 19th-century London as a Great Wen. Apparently, George didn’t appreciate that many of the considerable vices of cities are the price of the very progress that he cherished, a price that growing millions worldwide have been and are still willing to pay, both to move to large urban centers and to stay in them.
http://fee.org/freeman/detail/visions-of-progress-henry-george-vs-jane-jacobs?utm_source=Foundation+for+Economic+Education+Current+Contacts&utm_campaign=062ace3858-In_Brief_1_22_2015&utm_medium=email&utm_term=0_77ef1bd48e-062ace3858-14101597
History of Taxation in the United States
The Definition of Income Tax: The income tax is a direct tax which is levied on the net income of private individuals and corporate profits. Income tax systems range from flat tax to extensive progressive tax systems.
Tax History - An Introduction
Taxes in general have been around since the beginning of civilization. The earliest known tax was implemented in Mesopotamia over 4500 years ago, where people paid taxes throughout the year in the form of livestock, which was the preferred currency at the time. The ancient world also had estate taxes, or death taxes. The earliest recorded evidence of a death tax came from ancient Egypt, where they charged a 10% tax on property transferred at time of death in 700 BC.
Since then the way we pay taxes has changed significantly. However, some ancient taxes still persisted into the modern world. In 2006, China eliminated what was the oldest still-existing tax in history. An agricultural tax was created 2,600 years ago and was eliminated in 2006 to help improve the well-being of rural farmers in China.
Learn about unusual taxes throughout history.
A History of Taxes in the United States
It's hard to believe America was founded to avoid high taxation.
In United States, the tax system evolved dramatically through the nation's history. There wasn’t always an income tax, and initially tariffs provided the main source of revenue for the government. New taxes were often introduced during times of war to raise additional revenue, and they were generally allowed to expire once the war was over.
Taxation in the United States can be traced to the colonists, when they were heavily taxed by Great Britain on many things from tea to legal and business documents that were required by the Stamp Tax. Most colonists objected to this form of taxation, since they had no political voice or input about the creation of new taxes, giving rise to the term "taxation without representation." Since the King of England ignored demands by the colonist to abolish taxes, some colonists participated in protests such as the Boston Tea Party. However, that is not the only stamp act that existed in America's history. Toward the end of the 1700’s, after the colonies obtained their independence from Britain, Congress passed the Stamp Act of July 6, 1797, that levied taxes on wills, personal estates, and the transferred possessions of the deceased. Estate and so-called death taxes were some of the earliest additions to the tax code. The tax only lasted 5 years, and was repealed in 1802.
Income Taxes in America
The first income tax was created in 1861 during the Civil War as a mechanism to finance the war effort. In addition, Congress passed the Internal Revenue Act in 1862 which created the Bureau of Internal Revenue, an eventual predecessor to the IRS. The Bureau of Internal Revenue placed excise taxes on everything from tobacco to jewelry. However, the income tax did not last and was not renewed in 1872. In addition, the Revenue Act of 1862 created a federal estate and gift tax system. Following the end of the Civil War, those taxes were rolled back but the War Revenue Act of 1898 created another death tax to raise revenue for the Spanish-American War.
After the Civil War the income tax didn’t gain much support. In 1894 Congress passed the Wilson-Groman tariff which was an income tax at the rate of 2% for income over $4,000 but it was overturned by the Supreme Court in 1895. In early 20th century the income tax enjoyed renewed support, and in February of 1913 the Sixteenth Amendment was ratified to the Constitution, thus granting Congress the power to collect taxes on personal income. The new system collected the income tax at the source, it is done today, where taxes are initially withheld before the income reaches the recipient. In 1914 The Bureau of Internal Revenue released the first income tax form, called Form 1040. This still remains the main income tax form and it has been re-issued almost every year since then (learn about the evolution of the 1040 Form). The first year was a test run where people simply sent in their forms to have them checked by the bureau for accuracy without paying any taxes. By 1915 some people, including several members of Congress voiced concerns about the complexity of the income tax form, stating that it was difficult for some to prepare and file their returns.
Federal Tax Revenue by Source
The Revenue Act of 1916 began the practice of adjusting tax rates and income scales. The original income tax was 1% for the bottom bracket, which was comprised of income up to $20,000, and 7% for the top bracket which was comprised of income over $500,000. Revenue Act of 1916 raised the top bracket to $2,000,000 and raised the rate for the bottom bracket to 2% and the top bracket rate to 25%.
The Revenue Act of 1916 also created what is widely considered the predecessor to the modern estate tax. At first the maximum rate was set at 10% for estates greater than $5 million. However, the rate increased the following year to 22% for estates valued at between $8 and $10 million and 25% for estates valued at over $10 million. By 1924 the top rate was 40% for estates valued at over $10 million. The Revenue Act of 1941 set the tax at 77% on estates valued over $50 million. In comparison, the lowest bracket of the estate tax, which was comprised of estates valued under $5,000 only rose from 1% to 3% over the same time period. By the 1970’s the top estate tax began to fall, decreasing down to 55% by 1986. In 1917 Congress created the corporate excess profit tax which taxed excess profits that were above a rate of return that was deemed reasonable. More changes to the tax code came over the next several years, raising the tax rate on the top bracket to as high as 77% by 1918.
Historical Income Tax Rates
Historic Lowest and Highest Tax Rates
Find a detailed overview of income tax rates and income tax brackets and you will find that income tax rates continued to change in the decades that followed. The income tax rate for the bottom income tax bracket grew, peaking at 22.2% in 1952. However, the lowest tax bracket at that point was comprised of individuals earning up to $4,000. The bracket size itself peaked in 2001 at $45,200. The tax rate for the top bracket also continued to grow and peaked at 92% in 1950. At that time the bracket was for individuals making over $400,000. Over the last decade the rate for the bottom tax bracket, which is individuals earning less than about $15,000, is at 10%. The rate for the top bracket, which is individuals earning around $350,000 is at 35%.
Tax Revenue by Income Level
Tax Code History and Tax Law Page Growth
The modern tax code is often described as complicated and tax code reform is a common issue among politicians. For example, Ronald Reagan along with Congress reformed the tax code twice during his two terms in office, once in 1981, and once in 1986. His reform provided what was at the time the largest tax cut in the nation's history. While he wasn't the first or the last to reform the tax code (nearly every recent president before or after him has attempted to reform the tax code in one way or another), his tax reform was considered historic. More recently, Bill Clinton lowered taxes for the middle class in the 1990's and in 2001 George W. Bush provided another massive tax cut for all incomes. These reforms reduced taxes, but they did not drastically simplify the tax code, keeping the issue a common topic of conversation among politicians. However, despite the complicated workings of the income tax, it can provide people with many tax breaks and tax deductions, some of them being quite unusual.
Number of Words in the Tax Code
The modern tax code has grown tremendously over the years. Currently, the tax code contains over 9,000 sections. The instructions for the 1040 form alone speak for the incredible growth of the tax code over its history. In 1913 they only took up 1 page, while nowadays they take up 174 pages! However, the modern tax code is much more broad and complex than the one released in 1913 and now includes many more categories, like employment taxes, financing of election campaigns, coal industry health benefits, and trust fund code. The incredible growth can be attributed to both expansions and small changes and revisions that are made to patch up loopholes. In roughly the last 10 years it is estimated that the tax code has been amended or revised over 4,000 times. – L.Y.
Tax History - An Introduction
Taxes in general have been around since the beginning of civilization. The earliest known tax was implemented in Mesopotamia over 4500 years ago, where people paid taxes throughout the year in the form of livestock, which was the preferred currency at the time. The ancient world also had estate taxes, or death taxes. The earliest recorded evidence of a death tax came from ancient Egypt, where they charged a 10% tax on property transferred at time of death in 700 BC.
Since then the way we pay taxes has changed significantly. However, some ancient taxes still persisted into the modern world. In 2006, China eliminated what was the oldest still-existing tax in history. An agricultural tax was created 2,600 years ago and was eliminated in 2006 to help improve the well-being of rural farmers in China.
Learn about unusual taxes throughout history.
A History of Taxes in the United States
It's hard to believe America was founded to avoid high taxation.
In United States, the tax system evolved dramatically through the nation's history. There wasn’t always an income tax, and initially tariffs provided the main source of revenue for the government. New taxes were often introduced during times of war to raise additional revenue, and they were generally allowed to expire once the war was over.
Taxation in the United States can be traced to the colonists, when they were heavily taxed by Great Britain on many things from tea to legal and business documents that were required by the Stamp Tax. Most colonists objected to this form of taxation, since they had no political voice or input about the creation of new taxes, giving rise to the term "taxation without representation." Since the King of England ignored demands by the colonist to abolish taxes, some colonists participated in protests such as the Boston Tea Party. However, that is not the only stamp act that existed in America's history. Toward the end of the 1700’s, after the colonies obtained their independence from Britain, Congress passed the Stamp Act of July 6, 1797, that levied taxes on wills, personal estates, and the transferred possessions of the deceased. Estate and so-called death taxes were some of the earliest additions to the tax code. The tax only lasted 5 years, and was repealed in 1802.
Income Taxes in America
The first income tax was created in 1861 during the Civil War as a mechanism to finance the war effort. In addition, Congress passed the Internal Revenue Act in 1862 which created the Bureau of Internal Revenue, an eventual predecessor to the IRS. The Bureau of Internal Revenue placed excise taxes on everything from tobacco to jewelry. However, the income tax did not last and was not renewed in 1872. In addition, the Revenue Act of 1862 created a federal estate and gift tax system. Following the end of the Civil War, those taxes were rolled back but the War Revenue Act of 1898 created another death tax to raise revenue for the Spanish-American War.
After the Civil War the income tax didn’t gain much support. In 1894 Congress passed the Wilson-Groman tariff which was an income tax at the rate of 2% for income over $4,000 but it was overturned by the Supreme Court in 1895. In early 20th century the income tax enjoyed renewed support, and in February of 1913 the Sixteenth Amendment was ratified to the Constitution, thus granting Congress the power to collect taxes on personal income. The new system collected the income tax at the source, it is done today, where taxes are initially withheld before the income reaches the recipient. In 1914 The Bureau of Internal Revenue released the first income tax form, called Form 1040. This still remains the main income tax form and it has been re-issued almost every year since then (learn about the evolution of the 1040 Form). The first year was a test run where people simply sent in their forms to have them checked by the bureau for accuracy without paying any taxes. By 1915 some people, including several members of Congress voiced concerns about the complexity of the income tax form, stating that it was difficult for some to prepare and file their returns.
Federal Tax Revenue by Source
The Revenue Act of 1916 began the practice of adjusting tax rates and income scales. The original income tax was 1% for the bottom bracket, which was comprised of income up to $20,000, and 7% for the top bracket which was comprised of income over $500,000. Revenue Act of 1916 raised the top bracket to $2,000,000 and raised the rate for the bottom bracket to 2% and the top bracket rate to 25%.
The Revenue Act of 1916 also created what is widely considered the predecessor to the modern estate tax. At first the maximum rate was set at 10% for estates greater than $5 million. However, the rate increased the following year to 22% for estates valued at between $8 and $10 million and 25% for estates valued at over $10 million. By 1924 the top rate was 40% for estates valued at over $10 million. The Revenue Act of 1941 set the tax at 77% on estates valued over $50 million. In comparison, the lowest bracket of the estate tax, which was comprised of estates valued under $5,000 only rose from 1% to 3% over the same time period. By the 1970’s the top estate tax began to fall, decreasing down to 55% by 1986. In 1917 Congress created the corporate excess profit tax which taxed excess profits that were above a rate of return that was deemed reasonable. More changes to the tax code came over the next several years, raising the tax rate on the top bracket to as high as 77% by 1918.
Historical Income Tax Rates
Historic Lowest and Highest Tax Rates
Find a detailed overview of income tax rates and income tax brackets and you will find that income tax rates continued to change in the decades that followed. The income tax rate for the bottom income tax bracket grew, peaking at 22.2% in 1952. However, the lowest tax bracket at that point was comprised of individuals earning up to $4,000. The bracket size itself peaked in 2001 at $45,200. The tax rate for the top bracket also continued to grow and peaked at 92% in 1950. At that time the bracket was for individuals making over $400,000. Over the last decade the rate for the bottom tax bracket, which is individuals earning less than about $15,000, is at 10%. The rate for the top bracket, which is individuals earning around $350,000 is at 35%.
Tax Revenue by Income Level
Tax Code History and Tax Law Page Growth
The modern tax code is often described as complicated and tax code reform is a common issue among politicians. For example, Ronald Reagan along with Congress reformed the tax code twice during his two terms in office, once in 1981, and once in 1986. His reform provided what was at the time the largest tax cut in the nation's history. While he wasn't the first or the last to reform the tax code (nearly every recent president before or after him has attempted to reform the tax code in one way or another), his tax reform was considered historic. More recently, Bill Clinton lowered taxes for the middle class in the 1990's and in 2001 George W. Bush provided another massive tax cut for all incomes. These reforms reduced taxes, but they did not drastically simplify the tax code, keeping the issue a common topic of conversation among politicians. However, despite the complicated workings of the income tax, it can provide people with many tax breaks and tax deductions, some of them being quite unusual.
Number of Words in the Tax Code
The modern tax code has grown tremendously over the years. Currently, the tax code contains over 9,000 sections. The instructions for the 1040 form alone speak for the incredible growth of the tax code over its history. In 1913 they only took up 1 page, while nowadays they take up 174 pages! However, the modern tax code is much more broad and complex than the one released in 1913 and now includes many more categories, like employment taxes, financing of election campaigns, coal industry health benefits, and trust fund code. The incredible growth can be attributed to both expansions and small changes and revisions that are made to patch up loopholes. In roughly the last 10 years it is estimated that the tax code has been amended or revised over 4,000 times. – L.Y.
Revenue Act of 1862 - History of greenbacks - the first DEFICITS and credit problems for the nation
http://books.google.com/books?hl=en&lr=&id=QALN4vWe7f0C&oi=fnd&pg=PA3&dq=+Revenue+act+of+1862&ots=50l5WhlZr9&sig=-EVbz3opBKSJtrEq7BEH7Gd5AjM#v=onepage&q=Revenue%20act%20of%201862&f=false
The Nation was running deficits and borrowing to cover the shortages paying interest as high as 12% - with some banks bidding as high as 36% - clearly the Treasury was in serious Trouble and Congress appeared to be powerless to make corrections.
http://api.ning.com/files/xwKFNe6rxx1HajnF3IkuxVNiQcH8-TKMdIz6**I9zEsU9aHMHGkIZ7ng3DCYYw1cjlZJtxmisvuq6ax1i17XQ6SQ92U40FqO/EssaysontheAmericanSystemitsPrincipleandObject.pdf
The Nation was running deficits and borrowing to cover the shortages paying interest as high as 12% - with some banks bidding as high as 36% - clearly the Treasury was in serious Trouble and Congress appeared to be powerless to make corrections.
http://api.ning.com/files/xwKFNe6rxx1HajnF3IkuxVNiQcH8-TKMdIz6**I9zEsU9aHMHGkIZ7ng3DCYYw1cjlZJtxmisvuq6ax1i17XQ6SQ92U40FqO/EssaysontheAmericanSystemitsPrincipleandObject.pdf
100 Years Ago: Instituting the Income Tax
By Admin on February 6, 2013
by Jack Kenny and John Larabell
February: Americans think of Black History Month, Valentine’s Day, Lincoln’s and Washington’s Birthday, and Groundhog Day. But February of 2013 is especially significant, as this month is the 100th anniversary of the ratification of the 16th Amendment empowering Congress to impose the federal income tax. For Americans in 2013, the federal income tax, automatic withholding, the IRS, and filing tax forms by April 15 are just a way of life. In fact, it is likely that most Americans are unaware that prior to 100 years ago, there was no federal income tax, with the exception of a short period when an income tax was used to help finance the Civil War.
Where We Began
Prior to 1913, the U.S. government was much smaller than today, and the taxes it collected through means other than an income tax were sufficient to finance federal government operations. For example, tariffs were placed on imports and excise taxes (similar to our modern sales tax) were placed on the sale of certain items such as horses and carriages, etc. “Indirect” taxes such as these were taxes on consumption rather than income, offering the citizen the option of controlling his tax burden by limiting his purchases. According to Article I, Section 2 of the Constitution, any type of “direct” tax, i.e., on a person directly, which could arguably include a person’s income, had to be apportioned among the states on a per-capita basis:
Representatives and direct taxes shall be apportioned among the several states which may be included in this union, according to their respective number, which shall be determined by adding to the whole Number of free Persons, including those bound to servitude of a Term of Years, and excluding Indians not taxed, three-fifths of all other persons.
So clearly any federal taxes on income would have to be applied uniformly, with each state contributing an amount proportionate to its population. That was the limitation the Constitution placed on direct taxes collected by the federal government. This limitation prevented the U.S. government from making first claim to the wealth of the people, effectively deciding how much income the people would be allowed to keep. On the other hand, as noted above, with the indirect taxes — particularly tariffs — that were the principal means for financing the federal government prior to the advent of the income tax, the people could to a large extent escape or limit the tax via their buying habits, and a government dependent upon tariffs and other indirect taxes for revenue could only raise the taxes so high without defeating the revenue purpose of the tax. Alexander Hamilton in 1787 expressed this eloquently in The Federalist, No. 21:
It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
America’s early leaders understood the devastating effect taxes could have upon the liberty of a country’s citizens. As Supreme Court Chief Justice John Marshall wrote in the 1819 case McCulloch v. Maryland, “The power to tax is the power to destroy.”
Enter Karl Marx
In 1848, Karl Marx declared in his Communist Manifesto that a progressive tax on personal income was one of the 10 essential measures to ensure a communist revolution in an advanced country in order to bring about his fabled “classless society.” Socialist and communist ideas gained momentum in many parts of Europe, and it wasn’t long before they reached America. Various attempts to impose a progressive federal income tax — making the rich pay a higher percentage than the poor — soon appeared in this country. The Revenue Act of 1861 was a federal income tax used to raise revenue to fund the Civil War. It was a flat tax of three percent on annual income above $800. The following year, this was replaced with a graduated (progressive) tax from three to five percent on income above $600 in the Revenue Act of 1862, which ended in 1866.
Even these temporary income taxes were unconstitutional, as they were a percentage of income rather than being apportioned. But the movement to impose a progressive federal income tax didn’t stop. The Socialist Labor Party advocated a graduated income tax in 1887, and the Populist Party demanded the same in its 1892 platform. The Populist Party, led by central-bank proponent William Jennings Bryan, advocated the income-tax law passed by a Democratic-led Congress in 1894. This was the first peacetime income tax, with a rate of two percent on income over $4,000, an amount that few people made in those days. The following year (1895) the Supreme Court ruled this tax unconstitutional in Pollock v. Farmers’ Loan and Trust Company.
In order to enact a progressive federal income tax in America — a socialist idea — the citizens and the legislature had to be convinced that it was in the best interest of the people. This was not overly difficult considering the prevailing political ideas of the time. The year 1913 was part of the Progressive era in our nation’s history. Populists and Progressives (essentially socialists) feared the concentration of wealth and power into a few private hands, a concern that eclipsed the earlier fear of the Founders of too much wealth and power concentrated in the hands of a central government. Even before Teddy Roosevelt’s “Progressive Party” of the 1912 election, there were progressives in both the Republican and Democratic Party who ostensibly wanted to put more power into the hands of the people, acting through their representative government, by taking it away from the “robber barons” and other “malefactors of great wealth.” For by this point in time, vast fortunes had been amassed by the titans of industry, such as the Rockefellers, Carnegies, and Vanderbilts. Wealth and power were being concentrated into the hands of fewer and fewer people at the top. This offered a perfect excuse to institute a progressive tax with the idea that it would “soak the rich.”
Interestingly, the progressive income tax was originally backed strongly by the rich themselves. Senator Nelson Aldrich of Rhode Island, for example, a man widely known to be John D. Rockefeller’s “inside man” in the Senate, was a principal proponent of a federal progressive income tax made legal by an amendment to the constitution. This is not surprising, for although the “progressives” who championed the income tax claimed that it would be a tax on the rich and that it would help the little guy, in reality it was largely a tax on the middle class. This is mainly because the wealthy, through the use of trusts and tax-exempt foundations, are able to escape much of their tax burden yet still have great influence and power over business, banking, and government. There was a significant difference between the propaganda and the reality; the populism championed by the progressives and populists was not the “share the wealth” program they portrayed it to be, but a control-the-wealth program. Under the guise of helping the little guy, the elites worked hard to implement an income tax. In keeping with the ideology of its primary backers, the new income tax was to be a “progressive” tax — one in which the tax rate increases as the taxable base income increases.
by Jack Kenny and John Larabell
February: Americans think of Black History Month, Valentine’s Day, Lincoln’s and Washington’s Birthday, and Groundhog Day. But February of 2013 is especially significant, as this month is the 100th anniversary of the ratification of the 16th Amendment empowering Congress to impose the federal income tax. For Americans in 2013, the federal income tax, automatic withholding, the IRS, and filing tax forms by April 15 are just a way of life. In fact, it is likely that most Americans are unaware that prior to 100 years ago, there was no federal income tax, with the exception of a short period when an income tax was used to help finance the Civil War.
Where We Began
Prior to 1913, the U.S. government was much smaller than today, and the taxes it collected through means other than an income tax were sufficient to finance federal government operations. For example, tariffs were placed on imports and excise taxes (similar to our modern sales tax) were placed on the sale of certain items such as horses and carriages, etc. “Indirect” taxes such as these were taxes on consumption rather than income, offering the citizen the option of controlling his tax burden by limiting his purchases. According to Article I, Section 2 of the Constitution, any type of “direct” tax, i.e., on a person directly, which could arguably include a person’s income, had to be apportioned among the states on a per-capita basis:
Representatives and direct taxes shall be apportioned among the several states which may be included in this union, according to their respective number, which shall be determined by adding to the whole Number of free Persons, including those bound to servitude of a Term of Years, and excluding Indians not taxed, three-fifths of all other persons.
So clearly any federal taxes on income would have to be applied uniformly, with each state contributing an amount proportionate to its population. That was the limitation the Constitution placed on direct taxes collected by the federal government. This limitation prevented the U.S. government from making first claim to the wealth of the people, effectively deciding how much income the people would be allowed to keep. On the other hand, as noted above, with the indirect taxes — particularly tariffs — that were the principal means for financing the federal government prior to the advent of the income tax, the people could to a large extent escape or limit the tax via their buying habits, and a government dependent upon tariffs and other indirect taxes for revenue could only raise the taxes so high without defeating the revenue purpose of the tax. Alexander Hamilton in 1787 expressed this eloquently in The Federalist, No. 21:
It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, “in political arithmetic, two and two do not always make four.” If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
America’s early leaders understood the devastating effect taxes could have upon the liberty of a country’s citizens. As Supreme Court Chief Justice John Marshall wrote in the 1819 case McCulloch v. Maryland, “The power to tax is the power to destroy.”
Enter Karl Marx
In 1848, Karl Marx declared in his Communist Manifesto that a progressive tax on personal income was one of the 10 essential measures to ensure a communist revolution in an advanced country in order to bring about his fabled “classless society.” Socialist and communist ideas gained momentum in many parts of Europe, and it wasn’t long before they reached America. Various attempts to impose a progressive federal income tax — making the rich pay a higher percentage than the poor — soon appeared in this country. The Revenue Act of 1861 was a federal income tax used to raise revenue to fund the Civil War. It was a flat tax of three percent on annual income above $800. The following year, this was replaced with a graduated (progressive) tax from three to five percent on income above $600 in the Revenue Act of 1862, which ended in 1866.
Even these temporary income taxes were unconstitutional, as they were a percentage of income rather than being apportioned. But the movement to impose a progressive federal income tax didn’t stop. The Socialist Labor Party advocated a graduated income tax in 1887, and the Populist Party demanded the same in its 1892 platform. The Populist Party, led by central-bank proponent William Jennings Bryan, advocated the income-tax law passed by a Democratic-led Congress in 1894. This was the first peacetime income tax, with a rate of two percent on income over $4,000, an amount that few people made in those days. The following year (1895) the Supreme Court ruled this tax unconstitutional in Pollock v. Farmers’ Loan and Trust Company.
In order to enact a progressive federal income tax in America — a socialist idea — the citizens and the legislature had to be convinced that it was in the best interest of the people. This was not overly difficult considering the prevailing political ideas of the time. The year 1913 was part of the Progressive era in our nation’s history. Populists and Progressives (essentially socialists) feared the concentration of wealth and power into a few private hands, a concern that eclipsed the earlier fear of the Founders of too much wealth and power concentrated in the hands of a central government. Even before Teddy Roosevelt’s “Progressive Party” of the 1912 election, there were progressives in both the Republican and Democratic Party who ostensibly wanted to put more power into the hands of the people, acting through their representative government, by taking it away from the “robber barons” and other “malefactors of great wealth.” For by this point in time, vast fortunes had been amassed by the titans of industry, such as the Rockefellers, Carnegies, and Vanderbilts. Wealth and power were being concentrated into the hands of fewer and fewer people at the top. This offered a perfect excuse to institute a progressive tax with the idea that it would “soak the rich.”
Interestingly, the progressive income tax was originally backed strongly by the rich themselves. Senator Nelson Aldrich of Rhode Island, for example, a man widely known to be John D. Rockefeller’s “inside man” in the Senate, was a principal proponent of a federal progressive income tax made legal by an amendment to the constitution. This is not surprising, for although the “progressives” who championed the income tax claimed that it would be a tax on the rich and that it would help the little guy, in reality it was largely a tax on the middle class. This is mainly because the wealthy, through the use of trusts and tax-exempt foundations, are able to escape much of their tax burden yet still have great influence and power over business, banking, and government. There was a significant difference between the propaganda and the reality; the populism championed by the progressives and populists was not the “share the wealth” program they portrayed it to be, but a control-the-wealth program. Under the guise of helping the little guy, the elites worked hard to implement an income tax. In keeping with the ideology of its primary backers, the new income tax was to be a “progressive” tax — one in which the tax rate increases as the taxable base income increases.
Omniscient Observers?
Senator Norris Brown of Nebraska first proposed an income-tax amendment to the Constitution with Senate Resolutions 25 and 39. The amendment proposal finally accepted was Senate Joint Resolution 40, introduced by Senator Nelson Aldrich, the Senate majority leader and Finance Committee chairman:
ARTICLE XVI: The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
On July 12, 1909, the resolution proposing the 16th Amendment was passed by the 61st Congress and was submitted to the state legislatures. Not all states were initially in favor of an amendment, however. Many knew the imposition of the income tax would mean the rise of a federal revenue bureaucracy that extended from Washington, D.C., throughout the country and into the personal and business transactions of every American and every business. Private transactions would no longer be private; government would be able to monitor what everyone was doing. Richard E. Byrd, speaker of the Virginia House of Delegates, voiced his concerns on March 3, 1910, during the debate on whether to ratify the 16th Amendment:
It means that the state must give up a legitimate and long established source of revenue and yield it to the Federal government.
It means that the state actually invited the Federal government to invade its territory, to oust its jurisdiction and to establish Federal dominion within the innermost citadel of reserved rights of the Commonwealth.
This amendment will do what even the 14th and 15th Amendments did not do — it will extend the Federal power so as to reach the citizens in the ordinary business of life. A hand from Washington will be stretched out and placed upon every man’s business; the eye of a Federal inspector will be in every man’s counting house.
The law will of necessity have inquisitorial features, it will provide penalties. It will create a complicated machinery.
Under it, businessmen will be hauled into courts distant from their homes. Heavy fines, imposed by distant and unfamiliar tribunals, will constantly menace the taxpayer. An army of Federal inspectors, spies and detectives will descend upon the state. They will compel men of business to show their books and disclose the secrets of their affairs. They will dictate forms of bookkeeping. They will require statements and affidavits. On the one hand the inspector can blackmail the taxpayer and on the other, he can profit by selling his secret to his competitor.
When the Federal government gets a strangle hold on the individual businessman, state lines will exist nowhere but on the maps. Its agents will everywhere supervise the commercial life of the states…. I am not willing by any voluntary act to give up revenue which the State of Virginia herself needs, nor to surrender that measure of state’s rights which was, and the construction of the Federal courts have permitted to remain.
In 1910, New York Governor Charles Evans Hughes opposed the income-tax amendment. While he supported the idea of a federal income tax, Hughes believed the words “from whatever source derived” in the proposed amendment implied that the federal government would have the power to tax state and municipal bonds. He believed this would excessively centralize governmental power and “would make it impossible for the state to keep any property.” Support for the amendment did not relent, however. All three candidates in the 1912 presidential election — Progressive, or “Bull Moose candidate” Teddy Roosevelt, Republican William Howard Taft, and Democrat Woodrow Wilson — supported the tax. The ratification was complete on February 3, 1913. The Revenue Act of 1913 was enacted shortly thereafter to impose a new progressive tax, but it was a far cry from the tax burden Americans face today. Annual income below $20,000 (or about $460,000 in 2012) was taxed at one percent with an exemption of $3,000 (or nearly $70,000 in 2012); many Americans effectively paid no federal income tax. A “super tax” was instituted to really soak the rich, with an additional one-percent tax on successive income brackets over $20,000 up to $500,000. Thus, an individual earning $500,000 (nearly $11.6 million in 2012) would effectively pay a seven-percent federal income tax.
Senator Norris Brown of Nebraska first proposed an income-tax amendment to the Constitution with Senate Resolutions 25 and 39. The amendment proposal finally accepted was Senate Joint Resolution 40, introduced by Senator Nelson Aldrich, the Senate majority leader and Finance Committee chairman:
ARTICLE XVI: The Congress shall have power to lay and collect taxes on income, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
On July 12, 1909, the resolution proposing the 16th Amendment was passed by the 61st Congress and was submitted to the state legislatures. Not all states were initially in favor of an amendment, however. Many knew the imposition of the income tax would mean the rise of a federal revenue bureaucracy that extended from Washington, D.C., throughout the country and into the personal and business transactions of every American and every business. Private transactions would no longer be private; government would be able to monitor what everyone was doing. Richard E. Byrd, speaker of the Virginia House of Delegates, voiced his concerns on March 3, 1910, during the debate on whether to ratify the 16th Amendment:
It means that the state must give up a legitimate and long established source of revenue and yield it to the Federal government.
It means that the state actually invited the Federal government to invade its territory, to oust its jurisdiction and to establish Federal dominion within the innermost citadel of reserved rights of the Commonwealth.
This amendment will do what even the 14th and 15th Amendments did not do — it will extend the Federal power so as to reach the citizens in the ordinary business of life. A hand from Washington will be stretched out and placed upon every man’s business; the eye of a Federal inspector will be in every man’s counting house.
The law will of necessity have inquisitorial features, it will provide penalties. It will create a complicated machinery.
Under it, businessmen will be hauled into courts distant from their homes. Heavy fines, imposed by distant and unfamiliar tribunals, will constantly menace the taxpayer. An army of Federal inspectors, spies and detectives will descend upon the state. They will compel men of business to show their books and disclose the secrets of their affairs. They will dictate forms of bookkeeping. They will require statements and affidavits. On the one hand the inspector can blackmail the taxpayer and on the other, he can profit by selling his secret to his competitor.
When the Federal government gets a strangle hold on the individual businessman, state lines will exist nowhere but on the maps. Its agents will everywhere supervise the commercial life of the states…. I am not willing by any voluntary act to give up revenue which the State of Virginia herself needs, nor to surrender that measure of state’s rights which was, and the construction of the Federal courts have permitted to remain.
In 1910, New York Governor Charles Evans Hughes opposed the income-tax amendment. While he supported the idea of a federal income tax, Hughes believed the words “from whatever source derived” in the proposed amendment implied that the federal government would have the power to tax state and municipal bonds. He believed this would excessively centralize governmental power and “would make it impossible for the state to keep any property.” Support for the amendment did not relent, however. All three candidates in the 1912 presidential election — Progressive, or “Bull Moose candidate” Teddy Roosevelt, Republican William Howard Taft, and Democrat Woodrow Wilson — supported the tax. The ratification was complete on February 3, 1913. The Revenue Act of 1913 was enacted shortly thereafter to impose a new progressive tax, but it was a far cry from the tax burden Americans face today. Annual income below $20,000 (or about $460,000 in 2012) was taxed at one percent with an exemption of $3,000 (or nearly $70,000 in 2012); many Americans effectively paid no federal income tax. A “super tax” was instituted to really soak the rich, with an additional one-percent tax on successive income brackets over $20,000 up to $500,000. Thus, an individual earning $500,000 (nearly $11.6 million in 2012) would effectively pay a seven-percent federal income tax.
“Progressive” Purpose
While certainly not oppressive when compared to today’s income-tax schedule, the new federal income tax represented a radical departure from the type of government Americans had lived under prior to the income tax. It gave the federal government access to potentially huge amounts of revenue that the government could then tap to finance various programs, very much including unconstitutional programs. Of course, even with increased funds available via the income tax, spending money on unconstitutional programs is still unconstitutional, but with the federal government now possessing the means to siphon vast streams of money out of the pockets of the American people into the coffers in Washington, the temptation to tap this resource to empower Washington was clearly too great to resist. The transfer of revenue and power to Washington not only strengthened Washington but also weakened the states, which themselves are republics (not provinces) in our federal system of government and possess powers not transferred to the national government by the U.S. Constitution. The very fact that the income tax now imposed on the American people is a progressive tax means the tax serves the purpose not only of providing the U.S. government with a powerful means of obtaining revenue, but also enables the government to redistribute the wealth. And with the creation of a de facto central bank (the Federal Reserve), also in 1913, the federal government has been essentially freed from budgetary restraints, since it can now simply print money to cover operating expenses if revenue is insufficient.
In 1946, Beardsley Ruml, then chairman of the Federal Reserve Bank of New York, wrote an article in American Affairs in which he explained the real function of the income tax. The article was entitled, interestingly, “Taxes for Revenue Are Obsolete.” Ruml theorized that with the Federal Reserve, an institution and mechanism were in place to provide the federal government with a constant and virtually unlimited flow of dollars. That, of course, is inflationary, so Ruml believed that income taxes served the purpose of dampening inflation by lowering demand, a measure achieved by reducing the purchasing power of the masses by taking money out of their paychecks.
That was but one purpose of taxation, according to Ruml. The other was the redistribution of wealth from one class of citizens to another. Though done under the banner of social justice and equality, the real purpose was to supplant the decisions of a free people in a free market with the rule of the masters of a planned economy. As Ruml put it in his own words:
The second principal purpose of federal taxes is to attain more equality of wealth and of income than would result from economic forces working alone. The taxes which are effective for this purpose are the progressive individual income tax, the progressive estate tax, and the gift tax. What these taxes should be depends on public policy with respect to the distribution of wealth and of income. These taxes should be defended and attacked in terms of their effect on the character of American life, not as revenue measures.
For a while the populist pipe dream of taxing the rich seemed a reality, but soon the true socialist agenda of eliminating the bourgeois middle class became evident. By 1920, only 12 percent of the adult population paid an income tax. By 1940, that percentage had doubled. In 1942, the “temporary measure” of automatic withholding was instituted but never ended. Withholding gives the federal government the first crack at everyone’s income. The government now takes what it wants and needs for its many projects, most of them unconstitutional, and leaves the income earner the rest.
By 1960, more than two-thirds of American adults were paying the income tax, with most of it withheld from every paycheck. By the 1980s, estimates were that 75 to 80 percent of the nation’s adults were paying the tax and that taxes on incomes amounted to 25 percent of all earnings, with taxes from all sources — federal, state, and local — moving above the one-third mark. Though the first graduated income tax hit very high earners at only seven percent, by 1921, the effective top rate had been pushed to 73 percent for those earning over $1 million. The 1954 Tax Code contained 24 brackets beginning with a rate of 20 percent for income under $2,000 (about $17,000 in 2012) and ending with a ridiculous 91 percent on income over $200,000 (about $1.7 million in 2012). The tax rates have been subsequently lowered several times since then, but still remain oppressively high compared to what they were in 1913.
Fear the Feds
What the income tax has done to economic, social, and personal freedom in the United States is remarkable. Investigating, targeting, and auditing of individuals, many times as reprisals for public statements or political activity unwelcome by those in power, has become a staple of American social and political life. For instance, the right to privacy has had a big hole blown in it, and the power of bureaucracy has been expanded enormously. Many Americans live in fear of a tax audit, and the tyranny and terror of the IRS in some instances approaches that of the former Soviet KGB. Governments should live in fear of the people, not the other way around. That may have been the case in America at the end of the 18th century when the Constitution was adopted, but it is surely not the case now.
With a strong central government empowered by a federal income tax, American society of today would be nearly unrecognizable to those living and working before 1913. The recipients of government aid or wealth redistribution have become increasingly dependent on government. And the war machine, fueled by both the income tax and the Federal Reserve, has made the U.S. government feared throughout the world. The redistribution of wealth has even been made international through foreign economic and military aid, all paid for courtesy of the U.S. taxpayer. By the end of World War II, the master planners had created not only the United Nations, NATO, and other entangling alliances, but the World Bank and the International Monetary Fund, all useful for placing the people’s money at the disposal of the master class that would use it to further their rule in the political, social, and economic life of the world. They have strong allies in the institutions that are supposed to buttress and expand the liberty and the welfare of the American people, from schools and other government institutions, to the news media and institutions of higher learning, both public and private. The greatest allies are the twin evils of ignorance and apathy.
Americans need to be made aware of the fact that the concept of a federal progressive income tax is based upon unconstitutional principles foreign to our early republican form of a limited central government with strong protections on states’ rights and individual liberties. The fact that the 16th Amendment was added to the Constitution does not change those principles. The 16th Amendment must be repealed and the federal government limited to its constitutional powers for freedom to return to our Republic. The only way that this can happen is if Americans know the issues, and elect constitutionally-minded legislators. The strongest defense against institutionalized tyranny remains an educated and aroused American people.
While certainly not oppressive when compared to today’s income-tax schedule, the new federal income tax represented a radical departure from the type of government Americans had lived under prior to the income tax. It gave the federal government access to potentially huge amounts of revenue that the government could then tap to finance various programs, very much including unconstitutional programs. Of course, even with increased funds available via the income tax, spending money on unconstitutional programs is still unconstitutional, but with the federal government now possessing the means to siphon vast streams of money out of the pockets of the American people into the coffers in Washington, the temptation to tap this resource to empower Washington was clearly too great to resist. The transfer of revenue and power to Washington not only strengthened Washington but also weakened the states, which themselves are republics (not provinces) in our federal system of government and possess powers not transferred to the national government by the U.S. Constitution. The very fact that the income tax now imposed on the American people is a progressive tax means the tax serves the purpose not only of providing the U.S. government with a powerful means of obtaining revenue, but also enables the government to redistribute the wealth. And with the creation of a de facto central bank (the Federal Reserve), also in 1913, the federal government has been essentially freed from budgetary restraints, since it can now simply print money to cover operating expenses if revenue is insufficient.
In 1946, Beardsley Ruml, then chairman of the Federal Reserve Bank of New York, wrote an article in American Affairs in which he explained the real function of the income tax. The article was entitled, interestingly, “Taxes for Revenue Are Obsolete.” Ruml theorized that with the Federal Reserve, an institution and mechanism were in place to provide the federal government with a constant and virtually unlimited flow of dollars. That, of course, is inflationary, so Ruml believed that income taxes served the purpose of dampening inflation by lowering demand, a measure achieved by reducing the purchasing power of the masses by taking money out of their paychecks.
That was but one purpose of taxation, according to Ruml. The other was the redistribution of wealth from one class of citizens to another. Though done under the banner of social justice and equality, the real purpose was to supplant the decisions of a free people in a free market with the rule of the masters of a planned economy. As Ruml put it in his own words:
The second principal purpose of federal taxes is to attain more equality of wealth and of income than would result from economic forces working alone. The taxes which are effective for this purpose are the progressive individual income tax, the progressive estate tax, and the gift tax. What these taxes should be depends on public policy with respect to the distribution of wealth and of income. These taxes should be defended and attacked in terms of their effect on the character of American life, not as revenue measures.
For a while the populist pipe dream of taxing the rich seemed a reality, but soon the true socialist agenda of eliminating the bourgeois middle class became evident. By 1920, only 12 percent of the adult population paid an income tax. By 1940, that percentage had doubled. In 1942, the “temporary measure” of automatic withholding was instituted but never ended. Withholding gives the federal government the first crack at everyone’s income. The government now takes what it wants and needs for its many projects, most of them unconstitutional, and leaves the income earner the rest.
By 1960, more than two-thirds of American adults were paying the income tax, with most of it withheld from every paycheck. By the 1980s, estimates were that 75 to 80 percent of the nation’s adults were paying the tax and that taxes on incomes amounted to 25 percent of all earnings, with taxes from all sources — federal, state, and local — moving above the one-third mark. Though the first graduated income tax hit very high earners at only seven percent, by 1921, the effective top rate had been pushed to 73 percent for those earning over $1 million. The 1954 Tax Code contained 24 brackets beginning with a rate of 20 percent for income under $2,000 (about $17,000 in 2012) and ending with a ridiculous 91 percent on income over $200,000 (about $1.7 million in 2012). The tax rates have been subsequently lowered several times since then, but still remain oppressively high compared to what they were in 1913.
Fear the Feds
What the income tax has done to economic, social, and personal freedom in the United States is remarkable. Investigating, targeting, and auditing of individuals, many times as reprisals for public statements or political activity unwelcome by those in power, has become a staple of American social and political life. For instance, the right to privacy has had a big hole blown in it, and the power of bureaucracy has been expanded enormously. Many Americans live in fear of a tax audit, and the tyranny and terror of the IRS in some instances approaches that of the former Soviet KGB. Governments should live in fear of the people, not the other way around. That may have been the case in America at the end of the 18th century when the Constitution was adopted, but it is surely not the case now.
With a strong central government empowered by a federal income tax, American society of today would be nearly unrecognizable to those living and working before 1913. The recipients of government aid or wealth redistribution have become increasingly dependent on government. And the war machine, fueled by both the income tax and the Federal Reserve, has made the U.S. government feared throughout the world. The redistribution of wealth has even been made international through foreign economic and military aid, all paid for courtesy of the U.S. taxpayer. By the end of World War II, the master planners had created not only the United Nations, NATO, and other entangling alliances, but the World Bank and the International Monetary Fund, all useful for placing the people’s money at the disposal of the master class that would use it to further their rule in the political, social, and economic life of the world. They have strong allies in the institutions that are supposed to buttress and expand the liberty and the welfare of the American people, from schools and other government institutions, to the news media and institutions of higher learning, both public and private. The greatest allies are the twin evils of ignorance and apathy.
Americans need to be made aware of the fact that the concept of a federal progressive income tax is based upon unconstitutional principles foreign to our early republican form of a limited central government with strong protections on states’ rights and individual liberties. The fact that the 16th Amendment was added to the Constitution does not change those principles. The 16th Amendment must be repealed and the federal government limited to its constitutional powers for freedom to return to our Republic. The only way that this can happen is if Americans know the issues, and elect constitutionally-minded legislators. The strongest defense against institutionalized tyranny remains an educated and aroused American people.
FACTIONS OR PARTIES IN HISTORY
There has never been a single party that did not include all political views - Count the blue States and then count the NE States and the Swing States - No conservative or even near house of Senate majority could ever be formed.
That is precisely why I support the Article V Project . . It takes all the money and power from the Federal Government and returns it to the States where we the people can address our Elected Legislators in our respective States - not in DC - far away and unapproachable.
Faction
The public good is disregarded in the conflicts of rival parties, and that measures are too
often decided, not according to the rules of justice and the rights of the minor party, but by
the superior force of an interested and overbearing majority.
~James Madison, Federalist # 10
By a faction I understand a number of citizens, whether amounting to a majority or
minority of the whole, who are united and actuated by some common impulse of passion,
or of interest, adverse to the rights of other citizens, or to the permanent and aggregate
interests of the community.
~James Madison, Federalist # 10
There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests. It could never be more truly said than of the first remedy that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it
could not be a less folly to abolish liberty, which is essential to political life, because it nourishes faction than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency. The second expedient is as impracticable as the first would be unwise. As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other; and the former will be objects to which the latter will attach themselves. The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests.
The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors ensues a division of the society into different interests and parties.
The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, according to the different circumstances of civil society.
A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders ambitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes
have been interesting to the human passions, have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good. So strong is this propensity of mankind to fall into mutual animosities that where no substantial occasion presents itself the most frivolous and fanciful distinctions have been
sufficient to kindle their unfriendly passions and excite their most violent conflicts. But the most common and durable source of factions has been the various and unequal distribution of property.
Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views.
The regulation of these various and interfering interests forms the principal task of modern
legislation and involves the spirit of party and faction in the necessary and ordinary
operations of government.
~James Madison, Federalist # 10
The inference to which we are brought is that the causes of faction cannot be removed and that relief is only to be sought in the means of controlling its effects.
If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat its sinister views by regular vote. It may clog the administration, it may convulse the society; but it will be unable to execute and mask its violence under the forms of the Constitution.
When a majority is included in a faction, the form of popular government, on the other
hand, enables it to sacrifice to its ruling passion or interest both the public good and the
rights of other citizens.
~James Madison, Federalist # 10
The spirit of party in different degrees must be expected to infect all political bodies
~Alexander Hamilton, Federalist # 26
New-fangled and artificial treasons have been the great engines by which violent factions,
the natural offspring of free government, have usually wreaked their alternate malignity on
each other.
~James Madison, Federalist # 43
The demon of faction will, at certain seasons, extend his scepter over all numerous bodies
of men.
~Alexander Hamilton, Federalist # 65
The propriety of the thing [veto] does not turn upon the supposition of superior wisdom or
virtue in the executive, but upon the supposition that the legislature will not be infallible;
that the love of power may sometimes betray it into a disposition to encroach upon the
rights of other members of the government; that a spirit of faction may sometimes pervert
its deliberations; that impressions of the moment may sometimes hurry it into measures
which itself, on maturer reflection, would condemn.
The primary inducement to conferring the power in question upon the executive is to
enable him to defend himself; the secondary one is to increase the chances in favor of the
community against the passing of bad laws, through haste, inadvertence, or design.
~Alexander Hamilton, Federalist # 73
That is precisely why I support the Article V Project . . It takes all the money and power from the Federal Government and returns it to the States where we the people can address our Elected Legislators in our respective States - not in DC - far away and unapproachable.
Faction
The public good is disregarded in the conflicts of rival parties, and that measures are too
often decided, not according to the rules of justice and the rights of the minor party, but by
the superior force of an interested and overbearing majority.
~James Madison, Federalist # 10
By a faction I understand a number of citizens, whether amounting to a majority or
minority of the whole, who are united and actuated by some common impulse of passion,
or of interest, adverse to the rights of other citizens, or to the permanent and aggregate
interests of the community.
~James Madison, Federalist # 10
There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests. It could never be more truly said than of the first remedy that it was worse than the disease. Liberty is to faction what air is to fire, an aliment without which it instantly expires. But it
could not be a less folly to abolish liberty, which is essential to political life, because it nourishes faction than it would be to wish the annihilation of air, which is essential to animal life, because it imparts to fire its destructive agency. The second expedient is as impracticable as the first would be unwise. As long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As long as the connection subsists between his reason and his self-love, his opinions and his passions will have a reciprocal influence on each other; and the former will be objects to which the latter will attach themselves. The diversity in the faculties of men, from which the rights of property originate, is not less an insuperable obstacle to a uniformity of interests.
The protection of these faculties is the first object of government. From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results; and from the influence of these on the sentiments and views of the respective proprietors ensues a division of the society into different interests and parties.
The latent causes of faction are thus sown in the nature of man; and we see them everywhere brought into different degrees of activity, according to the different circumstances of civil society.
A zeal for different opinions concerning religion, concerning government, and many other points, as well of speculation as of practice; an attachment to different leaders ambitiously contending for pre-eminence and power; or to persons of other descriptions whose fortunes
have been interesting to the human passions, have, in turn, divided mankind into parties, inflamed them with mutual animosity, and rendered them much more disposed to vex and oppress each other than to co-operate for their common good. So strong is this propensity of mankind to fall into mutual animosities that where no substantial occasion presents itself the most frivolous and fanciful distinctions have been
sufficient to kindle their unfriendly passions and excite their most violent conflicts. But the most common and durable source of factions has been the various and unequal distribution of property.
Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination. A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests, grow up of necessity in civilized nations, and divide them into different classes, actuated by different sentiments and views.
The regulation of these various and interfering interests forms the principal task of modern
legislation and involves the spirit of party and faction in the necessary and ordinary
operations of government.
~James Madison, Federalist # 10
The inference to which we are brought is that the causes of faction cannot be removed and that relief is only to be sought in the means of controlling its effects.
If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat its sinister views by regular vote. It may clog the administration, it may convulse the society; but it will be unable to execute and mask its violence under the forms of the Constitution.
When a majority is included in a faction, the form of popular government, on the other
hand, enables it to sacrifice to its ruling passion or interest both the public good and the
rights of other citizens.
~James Madison, Federalist # 10
The spirit of party in different degrees must be expected to infect all political bodies
~Alexander Hamilton, Federalist # 26
New-fangled and artificial treasons have been the great engines by which violent factions,
the natural offspring of free government, have usually wreaked their alternate malignity on
each other.
~James Madison, Federalist # 43
The demon of faction will, at certain seasons, extend his scepter over all numerous bodies
of men.
~Alexander Hamilton, Federalist # 65
The propriety of the thing [veto] does not turn upon the supposition of superior wisdom or
virtue in the executive, but upon the supposition that the legislature will not be infallible;
that the love of power may sometimes betray it into a disposition to encroach upon the
rights of other members of the government; that a spirit of faction may sometimes pervert
its deliberations; that impressions of the moment may sometimes hurry it into measures
which itself, on maturer reflection, would condemn.
The primary inducement to conferring the power in question upon the executive is to
enable him to defend himself; the secondary one is to increase the chances in favor of the
community against the passing of bad laws, through haste, inadvertence, or design.
~Alexander Hamilton, Federalist # 73
