Instituting the Income Tax: The Passage of the 16th Amendment-The Income Tax-Into Law Caused Profound Changes throughout the United States. Not Surprisingly, Though the Amendment Was Sold as a Tax-the-Rich Plan, That Wasn't Its Real Intention
Kenny, Jack, Larabell, John, The New American
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 20 1 3, 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 he 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 he 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 (lie 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 hairier 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 1 1 9 case McCulloch V. Maryland, "The power to [ax 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. …