First Principles Blog Series On Taxation

Posted on | June 16, 2012 | 13 Comments

by Smitty

First Principles was taking me to task in the comments over on the Norquist post. This is the kind of back-and-forth that can be highly educational, if one can dodge the temptation toward ad hominem.
FP:

When it comes to political hot points in conservative political circles in Nevada, the Grover Norquist/Americans for Tax Reform “Taxpayer Protection Pledge” may be the most singularly significant. It has become, for some, THE litmus test for who a “real” conservative is and isn’t. But is that fair? Does the pledge make sense politically, policy-wise, or philosophically?
This blog was conceived specifically to answer questions like that, and now – with several Republican primary races pitting Pledge-signers against non-Pledge signers (both arguing over who the “true conservative” is) – is as good a time as any to explore this issue.
This is often painted as a “pragmatist vs. purist” argument – but I think that is too glib, especially for something as complicated as tax policy. And it lets both signers and non-signers off the hook when it comes to truly understanding – and explaining to their constituents! – the complex budget bills they’re considering.
I’m going to explore this on multiple fronts and in multiple posts to follow, but the bottom line is this – the Pledge is an un-serious document, poorly tailored to promote sound, conservative economic policy.

Read the whole thing, including the outline for the series.

Reacting to that outline, what seems strange is the tacit acceptance that DC has eminent domain over the individual citizen wallet. While I stood chided for calling Norquist’s tax pledge “necessary but insufficient” (I guess the contention lies in the use of “necessary”), what I hope to see from FP is some discussion of the 1913 Wilsonian debacle of Amendments 16, 17, & the Federal Reserve Act.

It’s my contention that the Federalist chain of command, (local, state, and federal government entities) was short-circuited in 1913. When DC gave itself the power to inflate the currency, senators became beholden to voters and not their sending state governments, and your very wallet became a wholly owned subsidiary of the IRS, the course was laid in for our current crisis. States balance their books somewhat regularly, mainly because “Federal dollars” can be caused to appear when desirable to paper over the worst of the embarrassments.

And I’m not a huge Norquist apologist. The commenters on the last post featuring him pointed out some border security questions. And his Pledge might be more honored in the breech than effectual. In a postmodern world, we have an Administration trying to argue that ObamaCare is a tax when you stand here, and a penalty when you stand there. So our government rapes us and refers to it as “intense massage” where taxes are concerned. Hence my sub-loyal approach to thinking about the GOP Establishment.

The argument that Norquist’s Pledge is worse than nothing seems over-stated. Efforts have to start somewhere. You can contend that the Pledge is sub-optimal. Fine. But some credit where due is in Order. Grover has helped call attention and trigger public involvement. That’s why the Left goes after him. That’s why he offers closing speeches at CPAC. Pretending that Norquist isn’t swinging a mean bat and isn’t contributing a hefty amount to the effort to recover liberty seems a trifle peevish, in my book.

Thus, I’m interested in seeing if FP is going to accept the cancer that is federal over-reach on taxation. Admittedly, any radical operation to remove the tumor by repealing Amendments 16, 17 & the Federal Reserve isn’t going to happen. But the historical evidence is that our current course is disastrous, and that DC has handled money and power like teenage boys with whiskey and car keys. I’d personally delegate tax collection back to the states, and let them compete economically. Let DC return to its enumerated powers, handling multi-state and international affairs, and checking the power of the states over individuals. Because I’m retro like that. Sure, we’re engineering in some inefficiency. Yes, it’s much harder for the aggregate muscle of the U.S. to be brought to bear internationally. The price of freedom and tyranny avoidance is both individual involvement and a measure of inefficiency.

Category: End The Fed

Comments

13 Responses to “First Principles Blog Series On Taxation”

PaulLemmen
June 16th, 2012 @ 11:12 am

I’m right there with you Smitty …
WJJ Hoge
June 16th, 2012 @ 11:27 am

James Piereson has a post over at New Criterion http://www.newcriterion.com/articles.cfm/Future-tense–X–The-fourth-revolution-7395 that looks at the times when discontinuities in the relationship between American society and American government have occurred. He picks the rise of the Jefferson Democrats, the Civil War, and the New Deal, and he suggest that the probable economic disaster related to federal debt could trigger another, something I have called America 5.0 .

Your observations about the Wilsonian power grab fits with Piereson’s view. It was the final stage of power consolidation of the federal government over the states that began in the Civil War, and it set the stage for the use of that power to create the New Deal. Indeed, one could argue that Wilson’s war socialism was a dry run for what FDR did in the 1930s.

Things that won’t go on forever won’t. The government’s present financial scheme will change soon. Let’s hope it changes for the better.
pelletman
June 16th, 2012 @ 1:41 pm

Why don’t we focus on the law? The 16th Amendment gave the Federal government NO new power to institute a direct unapportioned tax. Here is the info:

You know, I remember in Social Studies in 8th grade in my
public school being taught the 16th amendment “allowed the government to
collect income taxes” so it follows
that the government before the 16th amendment could not collect income taxes, (this
is the IRS position also, see their website)
because it had the following constitutional limitations:

Article 1, Section 2

Representatives and direct taxes shall be apportioned among
the several states which may be included within this union, according to their
respective numbers, which shall be determined by adding to the whole number of
free persons, including those bound to service for a term of years, and
excluding Indians not taxed, three fifths of all other Persons.

-AND-

Article 1, Section 9

No capitation, or other direct, tax shall be laid, unless in
proportion to the census or enumeration herein before directed to be taken.

So it took the 16th amendment, ratified in 1913
to remove the restriction on direct taxes so the income tax could be made law,
correct? Here’s the text of the
amendment:

Amendment XVI

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.

If that is the case, what do these following Supreme Court decisions mean?

“We are of
opinion, however, that the confusion is not inherent, but rather arises from
the conclusion that the 16th Amendment provides for a hitherto unknown power of
taxation; that is, a power to levy an income tax which, although direct, should
not be subject to the regulation of apportionment applicable to all other
direct taxes. And the far-reaching effect of this erroneous assumption will be
made clear by generalizing the many contentions advanced in argument to support
it…”

“[Taxation of “income” is] in its nature an excise entitled to be
enforced as such unless and until it was concluded that to enforce it would
amount to accomplishing the result which the requirement as to apportionment of
direct taxation was adopted to prevent, in which case the duty would arise to
disregard form and consider substance alone, and hence subject the tax to the
regulation as to apportionment which otherwise as an excise would not apply to
it” (That is, if the “income” tax ever comes to be administered as
something other than an excise, or on something unsuited to an excise, the rule
of apportionment must be applied.)

United States Supreme Court, Brushaber v. Union Pacific R. Co., 240 U.S. 1
(1916)

“The provisions of the Sixteenth Amendment conferred no new power of
taxation . . .”

United States Supreme Court, Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)

“The Sixteenth Amendment, although referred to in argument, has no real bearing
and may be put out of view. As pointed out in recent decisions, it does not
extend the taxing power to new or excepted subjects…”

United States Supreme Court, Peck v. Lowe, 247 U.S. 165 (1918)

“The Supreme Court, in a decision written by Chief Justice White, first
noted that the Sixteenth Amendment did not authorize any new type of tax, nor
did it repeal or revoke the tax clauses of Article I of the Constitution,
quoted above. Direct taxes were, notwithstanding the advent of the Sixteenth Amendment,
still subject to the rule of apportionment and indirect taxes were still
subject to the rule of uniformity.”

Howard M. Zaritsky, Legislative Attorney, American Law Division of the Library
of Congress, Report No. 80-19A, entitled “Some Constitutional Questions
Regarding The Federal Income Tax Laws”, page CRS-5 (1979)

“The legislative history merely shows… …that the sole purpose of the
Sixteenth Amendment was to remove the apportionment requirement for whichever
incomes were otherwise taxable. 45 Cong. Rec. 2245-2246 (1910); id., at 2539;
see also Brushaber v. Union Pacific R. Co., 240 U.S. 1, 17 -18 (1916).”

United States Supreme Court, South Carolina v. Baker, 485 U.S. 505 (1988)
jwallin
June 16th, 2012 @ 1:54 pm

IMO, the 17th did more to slip the leashes on the Senators than the Fed Res Act.

Once the Senators began “representing the people” (read donors and cronies and moneyed constituents), Senators were free to act against a States interests with little control by those selected/elected to look out for the States interest in the State.

It’s easy to convince a sufficient plurality that you’re working for the State’s interest when you deliver Federal Tax money back to those who paid it or would like to have more back.

Without the input of the State Government in the election/selection of Senators we took a bicameral legislature that was supposed to represent the People and The States and made in a two tier system of representatives of the people. Since Senators serve 6 years this allowed that body to accumulate (like barnacles and other unpleasant hangers on) habits, practices and assumptions that wind up many times being inimical to the State they represent. And yes to the people residing in that State.

It was a bad move. Along with the limitation of 2 terms for President.
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June 16th, 2012 @ 2:33 pm

[…] The Other McCain | First Principles Blog Series On Taxation […]
Adobe_Walls
June 16th, 2012 @ 3:17 pm

It’s hard to imagine the income tax functioning within the restrictions of apportionment.
pelletman
June 16th, 2012 @ 3:39 pm

Exactly. It doesn’t. You are only liable for the tax if you have “taxable income” which unless you engage in an excise – see Brushaber – taxable activity, you don’t. That could be invest in a federal corp, have a govt job and maybe some other govt attached benefits you don’t have “taxable income” or “gross income” Go here and read the 58 page criminal complaint to congress and read the audio
http://werus.us/
CPAguy
June 16th, 2012 @ 3:52 pm

Some fine blogging lately, Smitty.
pelletman
June 16th, 2012 @ 4:00 pm

There is also the pesky 5th Amendment

“…nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”
Anyone care to argue that your money you earn from your labors is NOT your property? What just compensation are you getting when you send your hard earned money to them at the end of the barrel of a gun?
smitty
June 16th, 2012 @ 5:16 pm

My contention is that 16, 17 & the FRA combined are the overall problem.
Many will try to defend them on an individual basis, but the convolution is worse than the parts.
Orrin
June 16th, 2012 @ 5:41 pm

Thank you very much for the link, and for the commentary. I appreciate being challenged and pressed on stuff like this. Now I just need some surprise bazillion dollar inheritance so I can dive into it all full time! Stupid day job…

One thing here, though – I wouldn’t say that I “tacitly accept” that “DC has eminent domain over our wallets,” although one must understand that we as a people have already delegated the authority to the Feds to levy taxes, and the same is true of the states. I accept and embrace that government is necessary, but must be carefully limited. My beef with the pledge AS WRITTEN is that it doesn’t limit anything, and definitely doesn’t do it carefully. And whether or not the pledge was ever a good idea, moving forward it needs to be scrapped and replaced. But I’ll get to all that in the coming days…

Thanks again!
Quartermaster
June 16th, 2012 @ 6:35 pm

Individually they were all bad ideas. Combined, however, they are a disaster.
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