1913: America's Worst Year - The Income Tax
Income taxes feed bloated government.
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This is a multi-part series examining the worst year in American History: 1913.
The history of income tax in the United States is fairly complicated. Until the Civil War, there was no income tax. In fact, until the Civil War, there were no federal taxes except import duties.
The federal government managed for almost 45 years without any form of direct taxation whatsoever. It was the high cost of the war that lead Congress to levy excise taxes and an income tax.
The early income tax was graduated, had a standard deduction and allowed for other deductions, much like our tax system today. It also had the same key feature of employer withholding that we have in our system today. Relatively soon after the end of the Civil War, the income and some of the other taxes were repealed.
In 1894 a flat rate federal income tax was established and soon ruled unconstitutional. The federal government continued to rely on duties, excise taxes and land sales to finance itself.
This was a good thing - it limited income. With limited income, it was limited in its reach. Most Americans could live their life with little connection to the federal government. It didn't know how much money they made (or lost), and they didn't care.
The need for a Constitutional amendment shows that the Founding Fathers never intended an income tax. They could not imagine the government needing that much money. But they knew the federal government would need some money, so allowed for the taxation of imports and products (essentially, a consumption tax).
Their fears of a government run amok with too much money have proven to be well founded.
It's very interesting to observe that the government got hungry for more money fast. By 1917 the top income tax rate, for all those making over $1.5 million was 67%. Of course, this was viewed as fair - after all, the wealthy could afford to pay. A $40,000 income was taxed at 16%. A year later the top rate was raised to 77%.
Imagine making well over a million dollars ($24,061,987 in 2007 dollars) and being able to keep only $345,000 of it. There was little talk about the unfairness of the tax as only 5% of the population paid taxes on their income. Fortunately, World War One ended and Congress came to its senses, reducing income taxes drastically.
Then, Congress went on a yo-yo diet and with the stock market crash of 1929, it was time to hike those numbers up again. Except there wasn't a war. Nor was there an economic boom. Government took money out of the economy, making things even worse. But the government coffers were full!
The power that comes with large sums of money is a strong aphrodisiac. You get to tell people what to do, how to do it, where to do it. It was the income tax that really enabled Congress to amass power to itself. Before that, it didn't have enough money to really throw its weight around.
The story of Harold L. Ickes is a nightmare tale of how the power of money can distort reality. Ickes was given a ton of money and the power to spread it around.
Where did this money come from? Income taxes. Ickes was just redistributing wealth through the executive branch. The legislative branch hadn't even really got started yet (Medicaid, Medicare and Social Security were yet to come).
As head of Roosevelt's Public Works Administration, Ickes had the power to distribute an amount of money equal to half the entire Federal budget at that time, with the express purpose of getting local governments used to receiving Federal largess. And as a result, thousands of courthouses, schools, parks, and all sorts of things, which previously would have been funded by local taxpayers, appeared all across the country - and each clearly labeled as provided by "Harold L. Ickes, Secretary of the Interior."
But Harold L. Ickes didn't pay for these things. The taxpayers payed for it and Mr. Ickes took the credit.
This type of power also leads to a corruption of the tax system. Once the income tax was introduced, it was then possible to use the tax code to advance social and political agenda.
The second principle of the Communist Manifesto is a progressive or graduated income tax! Why? In order to use taxation to increase the division between the classes. It is this division between the classes that the communists wish to exploit to bring about their revolution. It also provides a source of income for the government to then use as it wishes... and it usually wishes to redistribute wealth to further ensure its own power.
While the Sixteenth Amendment didn't establish a progressive income tax system, it enabled the system to come into existence. We now have, enshrined in our tax code, the second principle of the Communist Manifesto. This is the legacy of the 16th Amendment.
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What does Chinese history have to teach America that Joe Biden doesn't know?
The Only True Flat Tax
Before I start, I want to tell you of a manager, a real leader that told me in a meeting one time in front of everyone else, "if you come to a meeting and you hear a plan presented that you believe is wrong and flawed and you don't have an alternative plan, then don't say anything!" This then is my alternative plan.
A national sales tax of say 12% collected by the state just like all sales taxes are already.
The time to tax someone is when they are deriving a benefit from something. A check given to you for work means nothing until you spend it. At the time you spend it (on goods or services) you are receiving something of real value. Also, just as a thought, if you don't like paying taxes then don't spend the money. That means that there will be more money available to borrow which will drive down the interest rates that you pay. Banks don't make any money when they are sitting on it anyway. They will be forced to lower the rates.
#1. The states are already equipped to collect a national sales tax. They have a tax collection system in place already.
1a. No need for IRS. This will reduce Fed. spending by billions. (And those people can get REAL jobs.) If the IRS "produces" nothing, then these people "produce" nothing either!
1b. No April 15. Money coming in all year. No complicated tax loop holes that only serve the VERY rich. (I'll bet the very rich will like this idea also.)
1c. You collect money from people that have no earned income: trust funders, etc.
1d. Employers pay 12% on every dollar they pay out to employees. No loop holes, no high priced tax consultants, etc. In the long run employers get a break also.
#2. We shrink the Federal Government.
1. No IRS.
2. No welfare Czar; goes to the state level.
3. No health, education and welfare; state level.
We get back to what the founding fathers wanted to begin with. The Fed is to provide: the common defense, commerce with other countries, commerce between the states. Not much else! We are (or at least were ) called THE UNITED STATES OF AMERICA. The Fed was never to be directly involved with the individual citizens. The core government was to be at the state level, close to where the people are. We want our government's necks close to our hands. This is why and what the second amendment is about.
This is by far not an exhaustive plan for this idea but it is enough to get the idea and for a "thinking" person to see how and why it will work.
This one move should shrink the Federal Govt. by at least 50%. They twisted the Golden Rule a long time ago. The rule is: Treat others like you want to be treated. Not, the man with the gold makes the rules.
Tell me why those who are to be serving us are living in the mansion and we in the servant's quarters.
The more I write this document the more I see that the ones that could do the most good to promote this is Rush Limbaugh, Sean Hannity, Mike Huckabee, Michael Steel, Bill O'Riley, Neil Cavuto, and maybe even Steve Forbes. I myself am nobody, but I do like to think and to solve problems. I just don't have any clout or influence or an audience.
I hope that someone who has these things that I do not posses can see the value in this and take it and run with it. I believe that Sarah Palin would do something positive with this also.
By the way, do you think that the Govt. would think differently if they knew that a $50 toilet seat would cost them an additional 12% in sales tax? (Did I mention that any time some goods or services were paid for, that the paying entity would pay the tax. That means that giving money to a charity would not be taxed, but there would be no tax break afforded to those who give. The charity also would pay the tax any time they bought something.)
In the spirit of Joe the Plumber, just a simple thinking, plain speaking citizen,
John M. Atkinson
Durango, CO
Wow! So there is still intelligence, simple research, simple facts, accurate history, and persons who speak straight, common sense in this country. I LOVE the article on the beginning of the end (the Federal government beginning to permanently love the idea of an income tax (and enshrining it) in 1913. Millions of people have no idea about this FACT. I love this "Atkinson Plan" also. And it is interesting how income tax in the United States was essentially ONLY collected TEMPORARILY to fund wars as a last resort all the way through World War I almost. We NEED to educate Americans as to their own history and how the Federal government was enshrined in this way. READ the Consitutional amendments people--especially THIS one. And, than you both. Atkinson for President!
Or, better, THANK you both...sorry for the typo! :)