"Some people think the Federal Reserve Banks are US government institutions. They are not... they are private credit monopolies which prey upon the people of the US for the benefit of themselves and their foreign and domestic swindlers, and rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will." ~ Louis McFadden
Your Money or Your Life: Why We Must Abolish the Income Tax
James Madison reminds us in Federalist No. 10 that natural differences in people lead to differences in the kinds and amount of property they will acquire. These differences create factions, presenting a challenge to a government founded on liberty. A strong faction could overpower a pure democracy. But a republic, in which representatives of the people serve as caretakers of their rights, could prevent one faction from asserting its will over the others. The framers gave us a republic that held the government in check for over 100 years -- and Americans flourished like no other society in history. Then in 1913, we changed directions. Government teamed up with various factions and claimed ownership of our income, through the Sixteenth Amendment. The income tax required a menacing collection agency, the IRS, through which we've lost not only our property but our privacy. For years, many people have clamored for fundamental reform, suggesting 'remedies' like a flat tax or a national sales tax. But reform is a politician's game, argues Sheldon Richman in Your Money or Your Life. The only cure for the abuse is to abolish the income tax and replace it with nothing. A pillar of big government The income tax -- along with another 1913 creation, the Federal Reserve -- fuels government expansion. Thus, the Treasury Department has documented contingency plans to maintain revenue flow even if economic activity slows to a trickle. In the event of a nuclear holocaust, for example, the state wants to lend a hand by taxing 'illegal gains made by speculators and black market operators.' (his emphasis) The people must never learn 'they can get along without the bloated national state we labor under today.' The income tax -- or any other draconian tax -- creates permanent antagonism between taxpayers and government. Knowing this, and 'wanting to milk [taxpayers] to the maximum without setting off a revolt,' government tries to deaden the pain of theft through the ingenious device of tax withholding. For the past 60 years, withholding has helped drive home the idea that government owns our income -- what we never receive is not ours, right? It's also prevented taxpayers from holding back their taxes as a way of protest. Unjust and unfair Richman points out that the coercive nature of taxation per se renders it immoral and unjust. Therefore, any discussion of 'tax justice' is a sham -- how can there be a just injustice? People complain about tax loopholes, referring to income that's not taxed. We should not object that some things escape taxation; we should object that everything else doesn't. People who supported passage of an income tax during the so-called Progressive Era saw the advantages of a state with confiscated wealth to dispense. A loose coalition of statist intellectuals, businessmen seeking government favors, people envious of the great wealth being created and wishing to see the rich brought down -- found salvation in the income tax. So did the politicians who used them for a constituency. As a cover, supporters frequently attacked the 'prevailing distribution of wealth and income,' calling it unfair. In a market economy, Richman counters, income is not distributed as if someone ladled it from a central pot. 'Rather, it is obtained through countless voluntary transactions, each of which must be regarded as grounded in justice. Once that fact is grasped, the rhetoric of fairness in taxation is revealed as demagoguery.' The author talks about how special interests 'spend a great deal of time lobbying the tax-writing committees for favorable changes. That is one reason the [tax] code changes so often. The process is hardly a search for the tax code that will best serve the public.' The average taxpayer is forgotten. Most people are too busy earning a living and raising their families to keep up with arcane tax-law changes, let alone go to Washington and lobby tax committees. Born in crisis There's nothing like crisis to expand state power, and there's no crisis like war. Thus, it is no surprise that an income tax was first proposed during the War of 1812, and then not one, but six income tax bills passed during Lincoln's war. 'The tax quickly became an important revenue raiser,' Richman notes. 'At its height in 1866 it raised 30 percent of internal revenues.' An income tax was proposed often in succeeding years and finally passed again in 1894, but the Court killed it in Pollock v. Farmers' Loan and Trust Company. Between 1895 and 1909 the government fostered support for the tax through vote-buying schemes. Finally, in 1909, President Taft proposed a constitutional amendment to tax income from all sources, a move tax opponents favored, thinking it would die in ratification. The states ratified the Sixteenth Amendment in February, 1913. Government told the people it needed the tax to advance its social policies and protect American interests abroad. Congress enacted the first income tax law in October, 1913, with a top rate of 7 percent. It created a tax liability for only 2 percent of the population. But the top rate shot up to 67 percent in 1917 and 77 percent in 1918, the war years. The state's haul during World War I was more than $1 billion, ensuring its longevity as part of the revenue system. By World War II the income tax became universal. Fewer than 15 million tax returns were filed in 1940; by 1950, the number was over 53 million. 'In 1939 the income tax raised $1 billion. In 1945 it raised $19 billion. The most lucrative revenue pool was not the wealthy -- there weren't enough of them. Middle-class and working-class taxpayers represented the biggest potential for revenue.' What began as a movement to rob the richest Americans has turned into a burden for anyone making a decent living. Isn't it funny how government takes such a 'noble' goal and corrupts it for its own purposes. Richman believes we can eliminate the income tax. Abolishing it would leave enough revenue to keep government within Jeffersonian limits -- small and unintrusive. But people will need a new 'unwritten constitution,' he says, before they'll revolt against the tax. 'What is needed is the orneriness about intrusions on their liberty that the colonists and first Americans exhibited.' Take an ornery first step and read Your Money or Your Life.