When our founding fathers developed the rules and laws to run our government, they wrote certain “do’s and dont’s” into our U.S. Constitution, and some things were strictly not allowed. But even with their very specific “do’s and dont’s” list, one that they considered to be very unconstitutional still made it through.
What was it? Income Tax.
That’s right, except for a very short period after the Civil War, prior to 1913, taxes on a person’s income were deemed illegal. Why? Article 1, Section 8, clause 1 of our U.S. Constitution says that Congress has the power to impose taxes on, “duties, imports and excises” but only if these taxes are “uniform throughout the United States”. In simple words, you must tax all citizens evenly – which income tax does not do.
Now, if our founding fathers in all their wisdom were so opposed to this idea of taxing income, just how did it become law anyway?
Well, in 1911, a Professor Edwin Seligman wrote a book entitled “The Income Tax”. In his book, Professor Seligman promoted the idea of an income tax, and his view was that this tax on income was quite compatible with a free society if two things were kept in check.
- First, that a runaway tax rate could not be allowed. Seligman believed that any income tax exceeding 5% was a runaway rate.
- And, second, that if our government ever became so powerful that it controlled the citizens, the people would stand up to fight against it.
So what happened? Well, with the backing of the Professor’s book, in 1913 our U.S. Congress passed an amendment to our Constitution, the 16th amendment that said simply this –
“Congress shall have the power to lay and collect taxes on incomes, from whatever source derived”.
And that was it – on that day in February 1913, Income Tax was born.
So whatever became of the checks and balances of the Income Tax Theory by Professor Seligman?
- The first U.S. income tax rates ranged from 1% at it’s lowest to 5% at its highest.
- Only 5 years later, the top marginal rate had jumped all the way to 77%.
And as to this idea that the American people can keep in check our U.S. Government from growing so big that it swallows us up? Look around – we have already been swallowed!
It was founding father Thomas Paine who warned us. He said that we should be oh so careful not to “look upon our government as some wonderful, mysterious thing”.
Why? He finished with these chilling words:
“When people believe that illusion, then excessive taxes are obtained”.
Did you just feel that chill? It comes on me every April 15th, but even after, the chill never quite goes away – what about you?
