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.

Income tax is a very touchy subject among every American, but trying to educate or convince someone who may suggest that a Federal Income Tax is fundamentally important to sustain our nation, is lacking the necessary information to speak on the tax system and economy’s behalf.

Congress had no power to impose a direct income tax and has introduced legislation to repeal the 16th Amendment to the Constitution, which was ratified on February 3, 1913.

An income tax is the most degrading and totalitarian of all possible taxes. Its implementation wrongly suggests that the government owns the lives and labor of the citizens it is supposed to represent. Tellingly, “a heavy progressive or graduated income tax” is Plank #2 of the Communist Manifesto , which was written by Karl Marx and Friedrich Engels and first published in 1848.

In 1984, a U.S. government report said:

“100% of what is collected is absorbed solely by interest on the Federal debt and … transfer payments. In other words, all individual income tax revenues are gone before one nickel is spent on the services which taxpayers expect from their Government.”
— Grace Commission Report (PPSS) – Ordered by, and submitted to President Ronald Reagan on January 15, 1984 (wiki)

Apparently, something else actually pays for the cost of government services, with or without the government waste. Also apparent, bankers are banking with our income tax money.

Here is a list of some of the taxes that are imposed on Americans which more than sustain the US economy and infrastructure.

– A tax on imports. Needed to protect all the industries we used to have.

The Institute of Policy Innovation, which is the IPI Center for Tax Analysis reveal shocking numbers to the real taxes that are hidden in goods and services, and how much we really pay.

Despite all the attention given to federal income taxes, they represent only 42 percent of the total tax burden Americans carry each year. There is at least $657.5 billion in additional “hidden” taxes—$2,642 per person—that is not visible to the taxpayers. If more Americans realized that their total tax burden equaled 56 percent of annual personal consumption spending, there might be a second Revolution.

Unlike sales taxes that appear on a cash register receipt, hidden taxes are those charges that are not expressly clear to the taxpayer. One example is fuel. The average price of a gallon of gas last August was $1.49 and 43 cents of that amount represented taxes. That 37% tax rate does not appear on your receipt.

In recent years fuel taxes have become the fastest-growing federal tax imposed on middle-income Americans, amounting to $220 a person.

“Sin” taxes are also great sources of revenue. For instance, tax revenues from liquor are many times higher than the total profits of distillers. Nearly half the cost of a six-pack of beer is tax, and cigarette taxes alone will generate $45 billion through fiscal year 2005.

There are also hidden taxes on a litany of products and services ranging from inoculations to firearms to travel expenses. Almost half the cost of an $80 hotel room is tax as is 40 percent of a $159 airline ticket. And the typical monthly utility bill includes 25% tax.

With the rise in telecommunications subsidies and Internet commerce, Americans will be feeling—but not necessarily seeing—even more of a tax bite.

Not all taxes are hidden in the cost of goods and services. Some are even more surreptitious. Payroll taxes, including income tax withholding, “employer share,” and unemployment and workers’ compensation taxes not only mask the true burden of paying taxes but also raise the cost of hiring workers, which in turn actually lowers wages and conceivably threatens jobs.

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.

Sources:

End the Income Tax, Abolish the IRS (Website)
What is Taxed (Website)
The Electronic Code of Federal Regulations (e-CFR) (see below)
The Institute of Policy Innovation 

  1. “eliminated income” – Sec. 1.861-8(d), 1.861-8(d)(2), 1.861-8T(d)(2)
  2. “excluded and eliminated items of income” – Sec. 1.861-8T(d)
  3. “eliminated items” – Sec. 1.861-8T(d)
  4. “excluded income” – Sec. 1.861-8 and 1.861-8T
  5. “income that is exempt or excluded” – Sec. 1.861-8T(d)(2)
  6. “specific sources” – Sec. 1.861-8(a)(1)
  7. “specific guidance” – Sec. 1.861-8(a)(1)
  8. “how to determine taxable income” – Sec. 1.861-8(a)(1)
  9. “the rules [of Sec. 1.861-8 …] for determining taxable income” – Sec. 1.863-1(c)
  10. “Exempt income … defined” – Sec. 1.861-8T(d)(2)(ii)
  11. “income that is not considered tax exempt” [i.e. taxable income] – Sec. 1.861-8T(d)(2)(iii)

5 Comments Add yours

  1. walthe310 says:

    The 16th amendment to the US Constitution permits a graduated or progressive income tax at the Federal level. It was adopted in February, 1913 and has been opposed by the GOP ever since. Until they can engineer its repeal, the Republicans have been working to make the law ineffective. Their definition of a progressive income tax is an income tax on the income of progressives only. Their version of the tax is one that most people would define as regressive, the more you earn, the less tax you pay. For those earning the really big bucks, the tax rate is zero, or in some cases, less than zero. Personally, I believe that the progressive income tax is the fairest tax of them all.

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