The Biggest Snow-Job In World History: The Myth That 1913 America Adopted A Marxist Progressive Tax On "All That Comes In"
Thank goodness the sun is now shining...
YOU'VE GOT TO ADMIRE THE CHUTZPAH of the state-loving, Americanism-hating Fabian socialists who infiltrated our schools and media in the early decades of the 20th century. These intellectual saboteurs pitched a truly absurd notion-- that in 1913 America adopted the kind of broad-application income tax advocated by Karl Marx. And they pitched this nonsense in the face of direct contradiction by every authority imaginable.
But the saboteurs did their work relentlessly, and with the clever exploitation of current events and the co-option of two powerful special interests. Over the course of 30 years, from 1913 to 1943, the saboteurs successfully "memory-holed" what had been universal public understanding of the 16th Amendment and the tax laws with which it was concerned in America.
In place of an accurate understanding of the income excise the saboteurs implanted a myth that the 16th Amendment was some kind of transformational political and legal event. According to this myth our great-grandparents inexplicably abandoned the core governmental structure under which they had grown to be the freest and most prosperous society in world history-- a strictly limited federal tax authority-- and replaced it with the most puissant foundational element of a communist social structure-- an authority allowing the state to reach into every pocket to take whatever the collective deems necessary for re-distribution to whomever the collective imagines needs it more (or for any other purpose dreamt up by those in public office).
The success of the myth-mongering saboteurs ushered-in a sustained period of widespread historical and legal delusion-- the healthiest environment for the flourishing of the Leviathan they serve. And flourish it did, as intended.
The myth is easily recognized as a transparent lie, once you know to look...
THE MYTH PROMOTED BY THE FABIANS-- that when early 20th century Americans revived the then-51-year-old United States income tax from dormancy imposed by an ill-conceived 1895 Supreme Court ruling, they weren't reviving the existing income excise at all but were instead initiated a new form of taxation-- was (and is) a flat-out lie. Indeed, it is quickly revealed as an outright ridiculous lie when even just the most rudimentary consideration is devoted to the proposition.
After all, 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"-- says nothing whatever about repealing or modifying the two Constitutional provisions prohibiting capitations and other direct taxes except by the mechanism of apportionment (Article 1, Section 2 cl. 3 and Section 9 cl. 4). Thus, the amendment works no such modification or repeal, and this has been observed and declared as the law of the land repeatedly in the most definitive way possible.
Here, for instance, is an explanatory portion of the unanimous Supreme Court ruling in Brushaber v. Union Pacific RR Co., 240 U.S. 1 (1916) in which the court construes the amendment and its effects three years after its adoption. The court expressly rejects litigant Frank Brushaber's contention that the amendment created a hybrid direct-yet-unapportioned tax:
"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it...”
United States Supreme Court, Brushaber v. Union Pacific RR Co., 240 U.S. 1 (1916)
The court goes on to declare that the 16th Amendment did not modify or repeal the apportionment requirements for capitations or other direct taxes elsewhere in the Constitution, and could not be construed to have done so, while again flatly stating that the amendment did not create or permit a direct, yet unapportioned tax:
“But it clearly results that the [erroneous] proposition and the contentions under it, if acceded to, would cause one provision of the Constitution to destroy another; that is, they would result in bringing the provisions of the Amendment [purportedly] exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned."
Two leading law school journals contemporaneously reviewing the Brushaber decision each put it succinctly:
"The Amendment, the [Supreme] court said, judged by the purpose for which it was passed, does not treat income taxes as direct taxes but simply removed the ground which led to their being considered as such in the Pollock case, namely, the source of the income. Therefore, they are again to be classified in the class of indirect taxes to which they by nature belong."
"In Brushaber v. Union Pacific Railroad Co., Mr. C. J. White, upholding the income tax imposed by the Tariff Act of 1913, construed the Amendment as a declaration that an income tax is "indirect," rather than as making an exception to the rule that direct taxes must be apportioned."
The Supreme Court says the same again and again, with both executive and legislative branch experts re-affirming it all over the years:
“[B]y the [Brushaber] ruling, it was settled that the provisions of the Sixteenth Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived -- that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed.”
U. S. Supreme Court, Stanton v. Baltic Mining Co., 240 U.S. 103 (1916)
"If the tax is a direct one, it shall be apportioned according to the census or enumeration. If it is a duty, impost, or excise, it shall be uniform throughout the United States. Together, these classes include every form of tax appropriate to sovereignty. Cf. Burnet v. Brooks, 288 U. S. 378, 288 U. S. 403, 288 U. S. 405; Brushaber v. Union Pacific R. Co., 240 U. S. 1, 240 U. S. 12.
U.S. Supreme Court, Steward Machine Co. v. Collector of Internal Revenue, 301 U.S. 548 (1937)
"[T]he amendment made it possible to bring investment income within the scope of the general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty..."
Treasury Department legislative draftsman F. Morse Hubbard, quoted in testimony to Congress in 1943
"The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above. Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment…"
Legislative Attorney of the American Law Division of the Library of Congress Howard M. Zaritsky in his 1979 Report No. 80-19A, entitled 'Some Constitutional Questions Regarding the Federal Income Tax Laws'
Properly understood-- which means, understood as anyone would understand its plain words if not conditioned by a lifetime of distorting myth-monger nonsense-- the 16th Amendment says nothing about modifying or repealing anything, and says nothing suggesting a definition of "incomes" as "all that comes in" or anything like it. Instead it simply says that what is meant by "incomes" as used in the amendment can be taxed without apportionment.
The meaning of that term, "incomes", was, at the time of the amendment, already thoroughly established by 51 years of consistent statutory usage and judicial construction. Enacted in 1862, the income tax had been the focus of a dozen large and elaborate pieces of legislation between then and 1913, all of which used the term in a completely consistent fashion, and were consistently construed by the courts in the same way.
The meaning of "incomes" as used in the 16th Amendment is also necessarily dictated and controlled by other relevant provisions of the Constitution already in place when "incomes" became a Constitutional term in 1913. Those provisions, Article 1, Section 2 cl. 3 and Section 9 cl. 4, lay down the rule that only non-capitations (and only non-direct taxes generally) can be collected without apportionment.
Because of the apportionment rule, which is nowhere declared as modified or repealed by the 16th Amendment, the "incomes" being considered in the 16th Amendment and declared collectable without apportionment must be confined to objects of indirect taxation (and particularly cannot be anything which is the object of a capitation as defined by Adam Smith, per the historical records and the express finding of the US Supreme Court). And that this is the case is exactly what is uniformly said by that tall stack of authorities quoted above.
The simple, indisputable fact is, the "incomes" with which the 16th Amendment is concerned can only be excise-taxable-activities (measured and denominated by the gains the distinguished activities produce)-- not one whit different in character or scope from what they had been long before the amendment. Here's F. Morse Hubbard again, drilling down on that point in his 1943 testimony to Congress:
"The income tax... ...is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax; it is the basis for determining the amount of tax.”
As is seen in Hubbard's words, the straightforward declarations of the Brushaber court, and those of all the other authorities cited, the 16th Amendment changed nothing about what is taxed or how the tax applies. The only meaning and effect of the amendment was to overrule the conclusion in an 1895 Supreme Court decision (Pollock v. Farmer's Loan & Trust) that the application of the tax to dividends and rent became legally a property tax by virtue of the sources (stocks and real estate) from which they were derived even though the dividends and rent were otherwise proper objects of an excise due to being privilege-based gains.
On the basis of that tax-on-the-fruit-is-a-tax-on-the-tree reasoning, the Supreme Court struck down 10 sections of the 1894 act reviving the income tax after 22 years of dormancy. The 16th Amendment was passed in order to nullify that ruling and allow the 51-year-old privilege excise to resume.
...but no one looked...
BUT WHO IN THE FIRST HALF OF THE 20th CENTURY READ THESE SUPREME COURT RULINGS and kept them in mind as the years passed, and how many folks attended those Congressional hearings? Too few, apparently. After 30 years of subversive lies that the 16th Amendment allowed for a Marxist indiscriminate federal tax on "all that comes in" (or on money, or gains, or economic activity generally, any one of which, or any variation of which, would be a capitation) without the discipline and limitations of apportionment, the American people fell for the myth in the early 1940s-- and in so doing, made the myth a reality.
75 years of darkness promptly descended upon America, a darkness which might well be described as the shadow thrown across the land by the cancerously-swollen state grown huge and terrible at the expense of individual liberty and prosperity. That cancerous growth, made possible by the widespread misapplication of the income tax which began in amidst the tumult and distraction of World War II, had been the goal of the Fabian myth-mongers the whole time, in the expectation that they and their ideological descendants would be the ones pulling Leviathan's strings.
It hasn't just been the Fabian socialists
AS I SAID EARLIER, the myth-mongers succeeded in part by persistence (and clever and forethoughtful self-emplacement in positions of intellectual and educational influence), and in part by pandering to the interests of two key groups, who were quickly co-opted into the disinformation campaign. These two groups consisted of people in government, and private-sector persons engaged in the distinguishable privilege-based activities to which the American "income" tax actually applies.
The interests of the myth-mongers themselves (some of whom were from among both of these other groups themselves) was the transformation of the political power structure in America from one of individual liberty and the sharply- and broadly-diffused distribution of power necessary to preserve individual liberty into a collectivist, centralized power structure they expected to dominate and exploit. But there is another side to the income tax issue.
The actual objects of the actual income tax lawfully in place in America are gains from the exercise of federal privilege. Gains from the exercise of federal privilege means, to put it bluntly, private benefits enjoyed from the use of public resources. Such privileges include ownership and profitable operation of national banks, subsidized railroads and federal land exploitation, certain armament industries, enjoyment of public office, certain categories of bond investments, and other specially-advantaged situations.
The revival of the income tax with the adoption of the 16th Amendment restored a taxation of these private benefits which had been on hiatus since 1895. All these generally well-heeled and influential beneficiaries of privilege who had been banking all their profits without returning a dime to the public till found themselves facing some serious haircuts.
These folks quickly realized, perhaps with the encouragement of the Fabian socialists, that it is personally less expensive to be one of a great many contributors to the public fisc than one of only a few being tapped to finance the state, at what would be correspondingly higher rates. Plus, most of these folks also realized that the benefits to be had from exploiting the privileges to which they had access are much greater when the privilege-granter is big and powerful than when is it small enough to drown in a bathtub, as is the case when the Constitutional tax rules are being properly respected.
In short, the "1%" of the early part of the 20th century saw a lot to be gained for itself by arranging for its special "privilege tax" to become misunderstood and end up being paid by everyone, rather than just by themselves.
Ultimately, whether by agreement or simply a confluence of interest, the political class and the plutocracy found common cause with the Fabian ideologues. All put their shoulders behind the wheel delivering the "direct tax on all that comes in" myth of the transformational 16th Amendment into the public mind.
When all is said and done, the myth-mongers of the Fabian socialists, the political class and the 1% plutocracy has proven to be the greatest snow-job in world history. Trillions upon trillions of dollars of wealth and power have been fleeced from the hard-working American men and women who created it and have gone to enrich smug thieves who doubtless laugh all the way to the bank.
It's not much fun being tick-food, is it?
SO HERE'S A DISTURBING THOUGHT FOR EVERYONE who continues to pay the "ignorance tax"-- that is, an unapportioned tax on their unprivileged earnings being paid under the erroneous belief that the 16th Amendment authorized such a rule-defying capitation: You're letting yourself be a tool and a victim of the "1%", feeding them more wealth than they otherwise would ever have-- entirely at your expense, while simultaneously sparing them from their proper share of a tax which is designed to fall on them alone.
How does that feel? Not so good, right?
Here's another disturbing thought: The successful implantation of the myth of a Constitutionally-authorized unapportioned capitation-- especially in light of the apparent contradiction that suggests with the perfectly clear apportionment requirements found in Article 1-- has led many of today's Americans to see the Constitution as fundamentally flawed. What a windfall this is to those who have promoted the unapportioned-capitation-authority myth!
These promoters had chafed under the restraints of the Constitution for 140 years before breaking free 75 years ago or so. Seeing even pundits who claim to be classic liberals (libertarians) now disparage and denounce what Gladstone described as "the most wonderful work ever struck off at a given time by the brain and purpose of man," and what did indeed bind down the government by its chains effectively until the myth took hold, must send shivers of delight down the scoundrels' backs.
Now, the good news!
HAPPILY, FREEING YOURSELF from the 1%'s parasitic grasp (and changing those shivers of delight to shivers of another kind) is easy. All you have to do is read 'Cracking the Code- The Fascinating Truth About Taxation In America'.
In as short a time as you can read that small book, you will become the master of your own wealth and power in the fashion intended by the Founders of this great country. Those Founders set up the taxation rules in the Constitution for one simple reason: to protect your liberty by restraining the dangerous servant they were creating at the same time. Their plan simply counts on you to look after your own interests in order to make it all work.
In as short a time as you can read that small book, you will join tens of thousands of your fellow Americans as part of the solution to the problem of Leviathan.
In as short a time as you can read that small book,, you will take a big step on behalf of all of us toward the restoration of the limited-government republic which was America's real claim to legitimate exceptionalism.
"Be the change you want to see in the world."
P.S. For a detailed discussion of the adoption of the 16th Amendment from the standpoint of the political considerations at the time, see this. For a drill-down on the meaning and effect of the amendment, see this.