2010 Federalist. No. 14, Taxes

2010 Federalist. No. 14, Taxes


Following World War II and the Korean War, the United States had raised tax rates to an all time high. When John Kennedy entered office in 1961, the top tax rate was 91%. The lowest tax rate was 20%; the government only allowed the lowest earning Citizens to keep 80% of the money that they earned and only 9% for the highest wage earners. The federal government took the rest. How did this happen?

Article. 1. Section. 8. of the Constitution states:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

In other words, Congress has the right to tax us, but it must be uniform throughout the United States. Everybody pays the same.

Article. 1. Section. 9. states:

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

In other words, all taxes were to be in proportion with the Census. Everybody was to be treated equally. Notice that all taxes were to be equal on all people. Everybody paid an equal share. Obviously that does not work. Some always have more making it equally true that some always have less.

FEDERALIST No. 10, James Madison wrote

The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. Every shilling with which they overburden the inferior number, is a shilling saved to their own pockets.

Clearly he says that it is tantamount to tax all with exact impartiality, everybody the same, but that we must use extreme caution, because taxation is always the favorite tool for ruling parties to punish their adversaries. Taking extra money from the weaker groups, allows the in-power party to pay less of their own money in taxes. Madison recognized the mantra of Progressivism early on. Whenever possible, I will do good with your money, but not mine. He is warning us to look after our checkbooks to protect ourselves from the ruling class. (See 2010 Federalist No. 3)

At this point, everybody paid the same share. Everybody held an equal stake in the operation of the federal government. Everybody was vested equally. This was changed by the 16th Amendment.

Amendment. XVI.

Passed by Congress July 2, 1909. Ratified February 3, 1913.

Note: Article I, section 9, of the Constitution was modified by amendment 16.

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.

After February 3, 1913, Congress had the power to tax incomes without relation to the Census and without regard to any apportionment between States. Forget that equal investiture! Now Congress has the ability to discriminate between classes to tax some people and not others. Granted that if they taxed all income the same, that might be fair, but they do not do that. James Madison’s fears in Federalist No. 10 just came true. People who worked hard were punished. People who did not work were rewarded. The goal was to tax the rich. Wealth redistribution had begun.

Following in John Kennedy’s footsteps, Ronald Reagan managed to bring large reductions in the tax rates. This also leveled the playing field somewhat. More money was left with the earners who spent it more freely. More money was circulated, and incomes for everybody rose. But while Reagan’s tax cuts were in effect, the Congress continued to raise spending. The government had more income but much more outgo. Deficits grew. Soon the Congress was raising the tax rates again. Both George H. Bush and Bill Clinton agreed to historic increases in tax rates. George W. Bush managed to pass cuts, but they were temporary, and Obama and the current Congress intend to let them expire. Rates are going up, way up.

The problem with tax increases, is that the American public cannot keep paying higher taxes. There is a limit. That leaves cutting spending. Cutting spending is the better choice since it would also drive job creation. While doing this, we need to achieve some fairness in taxation while not punishing the earners at the expense of jobs. The income tax plan is unfair. The top 1% of earners pay 39% of all taxes, the top 25% pay 86%, the top 50% pay 97%.

One solution would be a national sales tax in place of an income tax, revenues would be distributed throughout our economy based on what people choose to spend. Those spending more would pay more, but everybody pays the same rate. Now everybody is invested again, just like the Constitution envisioned originally.

This has several other benefits.

1. Nearly every state has a sales tax. They all have a collection system set up to collect it.

2. The Internal Revenue Service would not be needed other than those few personnel who would monitor the states collections.

3. The tax rules and regulations would be outdated and useless. The agency itself would be redundant.

4. Revenues would come in a steady stream each month as they are collected rather than once a year on April 15th.

5. Savings and preparations for retirement would not be taxed.

6. Each individual would be able to choose his tax rate by what assets he purchases.

Let the States collect the sales tax for the country. Eliminate the entire tax bureaucracy, make collections easier, fairer, quick and continuous. Imagine the savings this would bring immediately.
Citizen 2010