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.” Sixteenth Amendment, United States Constitution
(For Constitutional context, readÂ “To secure these rights…”1Â on The Bill of Rights and AÂ “Living Constitution”2Â for a Dying Republic. For additional resources, seeÂ The Patriot’sÂ Topical Essays3Â page and ourÂ Historic Documents4Â page.)
Benjamin Franklin said it best: “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”
As our nation’s Founders understood, the federal government would be constitutionally limited both in the means of collection and expenditure of the taxpayer’s money. The Constitution afforded citizens this protection in Article I, Section 9, which reads, in part, “No Capitation, or other direct Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.”
This constitutional protection was undermined, however, when the 16th Amendment was passed by Congress on July 2, 1909, and ratified on February 3, 1913: “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.”
Prior to the 16th Amendment, taxation in America was levied on the basis of consumption, not income. Tax based on consumption (a sales tax) entails limitations to that tax, because an excessive tax rate will itself stifle consumption and give rise to smuggling, black markets and other means of tax evasion. Speaking of taxation on consumption in theÂ Federalist Papers5, the definitive explication of our nation’sÂ Constitution6, Alexander Hamilton writes, “It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. … 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.” Fellow federalist and the author of our nation’s Constitution, James Madison, adds, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents….”
After all, writes Madison, the prerogatives of the federal government are limited by their explicit enumeration: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation and foreign commerce. … The powers reserved to the several States will extend to all the objects which in the ordinary course of affairs, concern the lives and liberties, and properties of the people, and the internal order, improvement and prosperity of the State.” Madison further notes, “If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions.”
Anti-Federalists also understood the need to restrict taxation to support only those things constitutionally reserved for the central government: “To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors is sinful and tyrannical,” concludes Thomas Jefferson. “A wise and frugal government … shall not take from the mouth of labor the bread it has earned. … Congress has not unlimited powers to provide for the general welfare but only those specifically enumerated. … Would it not be better to simplify the system of taxation rather than to spread it over such a variety of subjects and pass through so many new hands?”
At odds with these strict constructionist intentions was Franklin Delano Roosevelt, who did more damage to federalism than any president in our nation’s history. Indeed, he firmly believed in the funding of unconstitutional government growth by way of unconstitutional taxation. “Here is my principle: Taxes shall be levied according to ability to pay. That is the only American principle.” Of course, Roosevelt’s “American principle” was little more than a paraphrase of Karl Marx’s maxim, “From each according to his abilities, to each according to his needs.”
Yet the United States’ debate over taxation does not begin with Roosevelt, but dates back to the American Civil War. In 1861 Congress passed the nation’s first income tax, upheld by the Supreme Court, to fund the war against the seceded states. The tax consisted of a three-percent levy on incomes over $800; Congress repealed the income tax in 1872.
The income tax was soon resurrected, however, when Congress passed a two-percent tax on income over $4,000 as a part of an 1894 tariff bill. This time, though, the Supreme Court declared the tax unconstitutional in a five-to-four split decision. Under the leadership of such figures as William Jennings Bryan, the Democratic Party’s Populist Movement would keep alive the idea of an income tax over the next two decades.
Joined by the Republican Party’s progressive wing, Democrats attempted to install an income tax again in the tariff bill of 1909, under an amendment sponsored by Senator Joseph W. Bailey of Texas. With no real expectation that his amendment would pass, Bailey’s true intention was to embarrass Republicans as the party of “big business,” working against Democrats’ “party of the people.” Unable to confront the Democrats’ income-tax proposal directly due to the progressive-conservative split in his own party, Republican President William Howard Taft (1909-1913) did the unthinkable, recommending to Congress a constitutional amendment authorizing taxation on income. Though such an amendment’s passage through Congress seemed likely, Republicans considered the necessary three-fourths ratification by the states altogether impossible.
The 16th Amendment passed through Congress even easier than expected with votes of 77-0 in the Senate and 318-14 in the House of Representatives. Republicans’ plans went awry, however, when one state legislature after another gave its endorsement to the measure. Less than four years later, February 25, 1913, the 16th Amendment became the law of the land. Republicans had underestimated the wave of populist sentiment sweeping the country; a backlash to the era of America’s “robber barons.” For federal and state legislators alike, to vote against the amendment meant to be voted out of office.
Despite the shock of its passage in this political maneuver gone awry, the 16th Amendment had an innocuous effect in its early days. In 1913, only one percent the population paid the income tax, in an amount of one percent of net income only. This was not to last. Since 1913, through invasive taxation and regulation permitted under the 16th Amendment, the central government has intruded into every aspect of American life. As Nikita Khrushchev observed, “We can’t expect the American people to jump from Capitalism to Communism, but we can assist their elected leaders in giving them small doses of Socialism, until they awaken one day to find that they have Communism.”
Mindful of this “Marxist prophecy,” a commissioner for the Internal Revenue Service in the 1950s who resigned in disgust, T. Coleman Andrews, offers an analysis of the constitutional and social effects of the 16th Amendment so profound that it deserves to be quoted at length:
“Congress [in implementing the 16th Amendment] went beyond merely enacting an income tax law and repealed Article IV of theÂ Bill of Rights7, by empowering the tax collector to do the very things from which that article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of government agents and set the stage for searches of our books and vaults and for inquiries into our private affairs whenever the tax men might decide, even though there might not be any justification beyond mere cynical suspicion.
“The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember that under the Sixteenth Amendment, Congress can take 100 percent of our income anytime it wants to. As a matter of fact, right now it is imposing a tax as high as 91 percent. This is downright confiscation and cannot be defended on any other grounds.
“The income tax is bad because it was conceived in class hatred, is an instrument of vengeance and plays right into the hands of the communists. It employs the vicious communist principle of taking from each according to his accumulation of the fruits of his labor and giving to others according to their needs, regardless of whether those needs are the result of indolence or lack of pride, self-respect, personal dignity or other attributes of men.
“The income tax is fulfilling the Marxist prophecy that the surest way to destroy a capitalist society is by steeply graduated taxes on income and heavy levies upon the estates of people when they die.
“The income tax is bad because it is oppressive to all and discriminates particularly against those people who prove themselves most adept at keeping the wheels of business turning and creating maximum employment and a high standard of living for their fellow men.
“I believe that a better way to raise revenue not only can be found but must be found because I am convinced that the present system is leading us right back to the very tyranny from which those, who established this land of freedom, risked their lives, their fortunes and their sacred honor to forever free themselves.”
How, then, do we free ourselves from the tyranny of the present system? Contrary to the closet socialism articulated by FDR and his New Deal successors, a national sales tax would be a welcome and constitutionally permissible alternative to the socialist vision and statist implications of the current system. Our present-day progressive income tax not only punishes hard work and free-market success, it also restricts economic growth by stifling consumers and the private sector. Most importantly, the elimination of the income-tax system through repeal of the 16th Amendment would eliminate the federal government’s prerogative to levy inequitable taxes, and force greater government conformity to its constitutionally defined strictures.
At the same time, economists recognize that legitimate tax reform and tax reductions can be disastrous if not accompanied by comparable reductions in government spending. Spiraling deficits, including those being run up by the current administration, will have dire consequences for long-term economic health. Therefore, it is essential that any meaningful tax reform legislation, including but not limited to the repeal of the 16th Amendment and replacing the income tax with an alternative like a national sales tax or flat tax, be accompanied by reductions in government expenditures under the guidance of the Constitution’s own parameters for the federal government’s activity.
Given the limited influence of constitutional constructionists and fiscal conservatives in both chambers of Congress, even after a decade-long Republican controlled Congress, any alteration to the 16th Amendment stands no chance of passage on Capitol Hill, or of ratification by the states. This hard reality must serve only to bolster the resolve of citizens committed to the Founders’ notion of a constitutionally limited government — a limitation largely enforced by restraints in the collection and expenditure of tax revenue. As the central government continues to encroach upon every sphere of our lives, the time is ripe to bring the issue of fair and just taxation before the public eye.