Sunday, October 20, 2013

One Sentence Which Would Have Changed American History For The Better

Readers of this blog are well aware of the problems which face our country, and most of these problems- out-of-control government spending, a massive welfare system, federal dominion over functions which belong rightly to the states, for example- are directly tied to one big whopper of a problem: The absurdly long, complicated, and punitive federal income tax code.

A brief history lesson: in the first decade of the 20th century, the problem arose of funding new government services which couldn't be funded by the historical (constitutional) limits of federal taxation power. It was quickly learned, for instance, that a wooden-ship navy and a domestic militia were simply insufficient to defend the United States, and a more-modern military would require substantially more funding.

The new progressive movement found an opportunity to advance its agenda- namely, the socialist agenda. Karl Marx had suggested levying a progressive income tax as a major part of the communist goal of redistributing wealth from the rich to the poor, by taxing according to income level and giving the money away through a welfare system.

What we got, of course, was the 16th Amendment:
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.

As an aside, for those who stop reading at this point and begin chanting the FairTax mantra (link), let me point this out: The operative term isn't "income tax", it's "progressive". Had a national sales tax been adopted in 1913 instead of a national income tax, we would have a progressive sales tax today, which accomplishes the same goal by taxing consumption according to the value of the purchase. FairTax is not, by any means, a solution to this problem.

Back on point: Americans in 1913 would not, if they had known of it, accepted income taxation. What they did accept was a promise of a limited tax (another link), which most people would never pay. So, progressives played a monumental game of "Just The Tip" (yes, I mean that "Just The Tip", the game popularized on high school prom night; I use the term because I'm tired of the phrase "slippery slope"). The champions of the 16th Amendment claimed that the income tax would only be applied to the very wealthy, and the rate would never exceed 7%. Boy, did they lie their collectivist asses off.

What we have today is precisely what Marx intended from a progressive tax: Government power exercised through manipulative granting and loaning of money and tax carve-outs; a massive welfare and entitlement system made possible by massive revenues (and borrowing, but that's another story); and whole sectors of the economy which are so heavily taxed and regulated, that they cannot survive without government subsidy.

You, the reader, undoubtedly asks at this point "What one sentence would've prevented all of this?"

Here it is, in bold:

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; provided that no person or corporation shall be subject to pay a sum greater than seven per cent of his annual income in a given year.

And there it is. The addition of that single sentence- a limitation on the rate (or, a guarantee in writing of the promised rate), would have left no "wiggle room" for a massive, progressive tax. What would we have today? A 7% flat tax, with no deductions, credits, etc.; no Social Security, Medicare, or Medicaid (which are ostensibly funded by another income tax), and instead, private savings and investment; and no federal welfare system, since a 7% flat tax wouldn't provide enough revenues to pay for it, with welfare programs being left to the states (where they rightfully belong). And a change in the tax rate would require another Constitutional convention (good luck with that).

We'd also have less government interference in business, and more money in the pockets of taxpayers.

Oh, and by the way: Discussions about government debt, borrowing, and the Federal Reserve would be much broader and encompass more of the public than they do now. Why, you ask? Because the majority of Americans believe most of the government's revenue comes from taxation, because they don't comprehend the tax code (who does, really?), and the incomprehensibility of the tax code conceals the federal government's other revenue sources.

PS: Most of the links in this post are links to some of the previous posts I've done about FairTax, flat income tax, and the like. Read some of them!


  1. Now THIS is an EXCELLENT POST!! Sharing EVERYWHERE!!!

    1. Thank you! I'm @alexkauff on Twitter, by the way.