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Will Congress Repeal the Sixteenth Amendment?
You likely have already received tax documents, like W-2s, in preparation for your 2022 tax returns. This arduous yearly task may be a thing of the past—but probably not. Since its passage in 1913, there have been numerous proposals to repeal the Sixteenth Amendment. That attempt was again presented before the House of Representatives on January 9th, 2023. H.R. 25, also known as the FairTax Act of 2023, seeks to repeal the Sixteenth Amendment, dismantle the IRS, and implement a national sales tax.
Taxation is a tricky business. Its poor methods and administration can harass the people and cripple the economy. But if done properly, taxation can raise necessary funding for the government without becoming the beast we all fear. The Founders struggled to discover the best method of taxation. While there are many ways to raise funds, they determined that it was never a good policy to allow the national government to reach directly into the pockets of the people. However, this is exactly what the Sixteenth Amendment authorizes.
Taxation – A Historical Cause of Revolts
Few issues raise American tempers as much as that of taxation. Nor is our generation any different from those that preceded it. Early American patriots risked the stern British justice system by dumping a shipload of taxable tea into the bay at Boston. Many of these same men rioted in the streets of Boston to protest Britain's stamp tax.
After the Revolutionary War was over, deep-seated concerns about government taxation continued. Just months before the Constitutional Convention began, Shay's Rebellion erupted over issues of paper money, bank foreclosures, and unfair taxation. With this history of volatility, it is no wonder that taxation was a subject of hot debate in the national and state conventions.
The Task of Developing a Proper System of Taxation
The form of taxation chosen by a government has a profound impact, not only on the nation's economic health, but also on the extent to which the collection of revenues invades the privacy or otherwise violates the rights of the individual taxpayer. The framers of our Constitution believed that taxes should be very modest and should be "collected by mild and gentle means, by a peaceable and friendly application to the individuals of the community." (Francis Corbin) Yet it is clear that today's federal tax system, meaning both the enormity of the assessments and the government's tactics in collecting them, is far more oppressive than that of eighteenth-century Great Britain, which ignited the Revolutionary War and ultimately led to American independence.
Understanding the Founders' comments on taxation requires some definition of terms. In their writings taxes are divided into two general categories, "external" and "internal." External taxes are duties on goods imported from other countries and are often called "imposts." Import duties, or imposts, are always considered "indirect" because they are taxes on things, not people. Indirect taxes, sometimes called "consumption", can be passed on to the consumer and simply added to the purchase price of the product. Thus they are much less painful to collect than "direct" taxes, which are levied directly against an individual, his property, or his income and cannot be passed on to anyone else.
"Internal" taxes may be either direct or indirect. An "excise" is a tax on goods produced at home rather than abroad; like the impost, it is an indirect tax. Direct taxes include property taxes, income taxes, and capitation taxes. The word "capitation" comes from a Latin word meaning "head". A capitation tax is levied as "so much per head" regardless of wealth or other circumstances. This basis of taxation was less desirable to the Founders.
Since the passage of the sixteenth amendment in 1913, income tax has become a major threat to the constitutional rights of American citizens. Unlike a head tax, the income tax is a graduated or “progressive” tax which is a system of tax brackets where tax rates increase as income increases. While this might sound fair, especially to the lower and middle classes, it grossly violates our fourth amendment right “to be secure in [our] persons, houses, papers, and effects, against unreasonable searches and seizures.”
After resigning as the Commissioner of the Internal Revenue Service in 1955, T. Coleman Andrews made the following statement:
“Congress went way beyond merely enacting an income tax law and repealed Article IV of the Bill of Rights, by empowering the tax collector to do the very thing from which the Article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of the 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 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.”
Since no one really enjoys paying taxes, we commonly hear of "tax cut" proposals and "tax reform" either on the federal or state levels. Whatever they call it, these tax proposals usually wind up either increasing our taxes or placing a proportionately heavier burden on the middle and upper classes. Let’s “soak the rich” they say. Let them pay for it. But does it really soak the rich? Nothing could be farther from the truth. The wealthy, especially the super wealthy, had anticipated this very development and created a clever device to protect their wealth. It was called a “charitable foundation.” The idea was to consign the ownership of wealth, including stocks and securities, to a foundation and then get Congress and the state legislatures to declare all such charitable institutions exempt from taxes. They created thousands of exemptions, including:
- which items or income are taxable,
- what exemptions or deductions may be taken,
- whether or not it is an expense or a depreciable item, etc.
This method of collecting taxes has become so complicated that a whole industry of tax professionals and tax advisors was created just to tell us how much tax we owe. Certainly, there must be a better way.
The passage of H.R. 25 may be a welcome change by eliminating income tax and the IRS. But before we do that, we must have a plan in place to implement a sound taxing system. If we fail to apply good tax policy, we may create a bigger beast than we already have. As usual, the Founders have many of the answers we seek.
For a more complete history of the sixteenth amendment, see The Making of America, p. 738 – 742.