Could America exist without an income tax?

Question

The Case Against the Income Tax


Could America exist without an income tax? The idea seems radical, yet in truth America did just fine without a federal income tax for the first 126 years of its history. Prior to 1913, the government operated with revenues raised through tariffs, excise taxes, and property taxes, without ever touching a worker's paycheck. In the late 1800s, when Congress first attempted to impose an income tax, the notion of taxing a citizen's hard work was considered radical! Public outcry ensued; more importantly, the Supreme Court ruled the income tax unconstitutional. Only with passage of the 16th Amendment did Congress gain the ability to tax the productive endeavors of its citizens.

Yet don't we need an income tax to fund the important functions of the federal government? You may be surprised to know that the income tax accounts for only approximately one-third of federal revenue. Only 10 years ago, the federal budget was roughly one-third less than it is today. Surely we could find ways to cut spending back to 1990 levels, especially when the Treasury has single year tax surpluses for the past several years. So perhaps the idea of an America without an income tax is not so radical after all.

The harmful effects of the income tax are obvious. First and foremost, it has enabled government to expand far beyond its proper constitutional limits, regulating virtually every aspect of our lives. It has given government a claim on our lives and work, destroying our privacy in the process. It takes billions of dollars out of the legitimate private economy, with most Americans giving more than a third of everything they make to the federal government. This economic drain destroys jobs and penalizes productive behavior. The ridiculous complexity of the tax laws makes compliance a nightmare for both individuals and businesses. All things considered, our Founders would be dismayed by the income tax mess and the tragic loss of liberty which results.

America without an income tax would be far more prosperous and far more free, but we must be prepared to fight to regain the liberty we have lost incrementally over the past century. I recently introduced "The Liberty Amendment," legislation which would repeal the 16th Amendment and effectively abolish the income tax. I truly believe that real tax reform, reform that so many frustrated Americans desperately want, requires bold legislation that challenges the Washington mind set. Congress talks about reform, but the current tax debate really involves nothing of substance. Both parties are content to continue tinkering with the edges of the tax code to please various special interests. The Liberty Amendment is an attempt to eliminate the system altogether, forcing Congress to find a simple and fair way to collect limited federal revenues. Most of all, the Liberty Amendment is an initiative aimed at reducing the size and scope of the federal government.

Is it impossible to end the income tax? I don't believe so. In fact, I believe a serious groundswell movement of disaffected taxpayers is growing in this country. Millions of Americans are fed up with the current tax system, and they will bring pressure on Congress. Some sidestep Congress completely, bringing legal challenges questioning the validity of the tax code and the 16th Amendment itself. Ultimately, the Liberty Amendment could serve as a flashpoint for these millions of voices.

Answer 1

The case against Ron Paul's drivel...



The first income tax in the U.S. was passed in 1861 and lasted for 10 years, so in truth, the article starts with a falsehood. Additionally, a tax on the compensation a person receives in exchange for his or her labor has NEVER been declared unconstitutional. What the two Pollock decisions did declare was that a tax on income from property (i.e. rental income) and interest income, and income from municipal bonds was the same as a tax on the property itself and was a direct tax. The Pollock court was very clear that it was only a tax on the incomes from property that was a "direct tax," and other forms of income could be taxed without apportionment.



That a tax on wages and other compensation for labor would have been constitutional even before the adoption of the 16th Amendment was confirmed by the unanimous decision of the Supreme Court in Brushaber, in which the court stated:



“Nothing could serve to make this clearer than to recall that in the Pollock Case, in so far as the law taxed incomes from other classes of property than real estate and invested personal property, that is, income from ‘professions, trades, employments, or vocations,’ (158 U.S. 637), its validity was recognized; indeed it was expressly declared that no dispute was made upon that subject, and attention was called to the fact that taxes on such income had been sustained as excise taxes in the past. Id. p. 635.”

- Brushaber v. Union Pacific R.R. Co., 240 U.S. 1 (1916).



As was pointed out by another person, the income tax accounts for far more than 1/3 of the total revenues of the government. Additionally, Ron Paul's comment about reducing spending to 1990 levels would eliminate the need for the income tax completely ignores the effects of inflation. In reality, government spending would have to be reduced to 1970 levels or possibly earlier. Do you really think that is wise?



Personally, I would love a fair tax, but not for the reasons that you would. I am a moderately wealthy individual that earns far more than the average person. I do not have to spend as much as I do, but I know that by spending my money I create other jobs. However, if I desire to reduce my taxes, under the fair tax I can do so by reducing my spending. That is what most wealthy people will do. They will still spend more than the average person, but they will not buy as many luxuries. The overall tax burden for the wealthy will be entirely under their control and they will reduce their burden as they see fit.



Idiotic legal challenges to the tax code have failed every time. The 16th amendment is perfectly valid and the tax code is perfectly valid.



If you want to make a reasonable argument, tell your Congress people that you want a simplified tax code. Eliminate unnecessary deductions and credits but keep the tax brackets and the income tax.

Answer 2

Where do you get your information that only 1/3 of the Federal revenue comes from income taxes? That is certainly not true at all. For FY07:



Individual income taxes: 45.3%

Corporate income taxes: 14.4%

Social taxes (FICA & FUTA): 33.9%

Excise taxes: 2.5%

Other taxes (Gift, Estate, and Customs): 3.9%



If you propose to drop the income tax you're going to have to replace it with some other tax that will raise essentially the same revenues. And if you want to avoid massive social turmoil and collapse of the economy you're going to have to collect amounts from each taxpayer that are similar to what they are paying right now. You'll also need to significantly jack the minimum wage -- probably by 100% -- to replace the lost buying power of the working poor with the loss of the Earned Income Credit.



Merely repealing the 16th Amendment won't necessarily affect the income tax. The SC decision that invalidated income taxes in the late 1800s would likely be reversed upon revisit by a modern Supreme Court in much the same way as Brown v Board of Education reversed Plessy v Ferguson.



And please don't waste our time with rants about the so-called "Fair Tax" which is little more than a massive money grab for the wealthy that would trash an already fragile economy. Few folks have a spare $6,000 lying around to pay the tax on a new $20,000 car and even fewer have a spare $60,000 for the tax on a new $200,000 home.

Answer 3

Interesting essay.



You should run it through a fact checker. Obviously wrong facts in an essay weaken (more like destroy) the argument.



Some bring legal challenges to the 16th amendment. Courts have consistently upheld the right of the IRS to collect taxes, and people who bring that argument on their tax forms or as a reason for not filing are subject to an additional $5,000 frivolous position fine, in addition to usual penalties, interest, fraudulent return penalties and on some occasions jail. And the courts uphold that, too.