I understand that Misseans would like to see all taxes abolished, but please humor me.
Prior to the passage of the 16th amendment, direct taxes were to be "apportioned." Correct me if I'm wrong, but my guess is that this meant that the federal government had the authority, as delegated by the Constitution, to assess a tax against its member states on the basis of population. Is that correct? And if so, then it would be up to these individual states to determine the method in which its taxes or fees would be collected, in order to pay the tax assessed by the federal government. Am I right?
Is so, then I am even more troubled by these so-called "Fair Taxers" and "Flat Taxers." Why is it that no one advocates the repeal of the 16th, with the government simply assessing tax liabilities to the states? Then states could determine whether to implement sales taxes, income taxes, VAT taxes, user fees, etc., or any combination thereof... Why is it that these tax reformers seek a monolithic solution? It seems that if the federal government is going to exist, and it does need some revenue to fund its constitutionally mandated/permitted roles, then the best way to fund it would be a diverse selection of alternatives chosen at the state level.
The 16th amendment just defined an income tax as not direct and thus does not need to be apportioned.
If the Federal government wanted to do a property tax it would have be apportioned.
Peace
Thank you.
These definitions of "direct" and "indirect" make no sense to me. How is it that taxation on the income of an individual, excluding income generated from property, is considered "indirect" in the legal sense? My reading of the Constitution, which is evidentily incorrect, was that "indirect" taxes would be taxes assessed against the states, whereas "direct" taxes would be taxes assessed against individuals -- but which would have to be apportioned among the states as per Article I, Section 9 (thus making them indirect).
Even though this seems to be incorrect, it seems to me that a better solution than a "Fair" or "Flat" tax would be to repeal the 16th and institute a system of indirect taxation -- i.e. taxation of states by population -- via constitutional amendment. This would decentralize, limit Washington's invasion of people's privacy, allow states to develop their own solutions (some of which may be innovative), and best of all, set up a little federalist tension between the states and the federal government that is sorely needed.
Inquisitor:It would also allow for tax competition, I gather. This occurs in Europe, much to the EU's dismay (see Switzerland.)
I trust you are familiar with Germany, France and Italy (the three Great Sick Men of Europe) all pushing for a minimum tax standard in Europe, especially on manufacturing and commercial activities. This is "vehemently" opposed by countries like Eire, Poland and Slovakia, which have made their recent fortunes with low corporate taxes.
Jason Dean:These definitions of "direct" and "indirect" make no sense to me. How is it that taxation on the income of an individual, excluding income generated from property, is considered "indirect" in the legal sense? My reading of the Constitution, which is evidentily incorrect, was that "indirect" taxes would be taxes assessed against the states, whereas "direct" taxes would be taxes assessed against individuals -- but which would have to be apportioned among the states as per Article I, Section 9 (thus making them indirect).
Kakugo:I trust you are familiar with Germany, France and Italy (the three Great Sick Men of Europe) all pushing for a minimum tax standard in Europe, especially on manufacturing and commercial activities. This is "vehemently" opposed by countries like Eire, Poland and Slovakia, which have made their recent fortunes with low corporate taxes.
If you can't compete fairly then jack up the competition's expenses until you can, that's the way to stimulate the economy...
I suppose a link is in order discussing the 'tax competition' issue.
Anonymous Coward:If you can't compete fairly then jack up the competition's expenses until you can, that's the way to stimulate the economy...
Don't laugh. That was the founding principle of the Interstate Commerce Commission.
All: There is a lot of mis-information here, which I suppose is not uncommon. The 16th Amendment did not make Income taxes legal, nor did it allow for income taxes to be assessed withut apportionment. What it did is to make the taxing of income from different sources untaxable at different rates. That's all. (see "Brushaber vs. Union Pacific" 240 US 1) The purpose of passing the amendment was to get around the Pollach decision of 1895, which it did not. The Pollach decision declared the income tax of 1894 Unconstitutionalbecause th eact failed to separate the income (profit portion) of the returns from rent (on apartments and houses) from the return of capital part of the the rent. When one pays rent for housing, part of that rent represents a return of capital (for wear and tear) and that part is not profit (interest we would call it). The 16th did not change that although the congress thought that that was precisely what they were doing. The Supreme Court virtually laughed at them for this in the Brushaber case. Reading the Congressional Record from before and after the Amendment passed was a great education on the politics of public larceny I recommend to anyone. Only one Senator got it and gave a remarkable lecture to his fellows on taxation and it's history in this country. Please note that today's "income"tax is not an income tax, but an unapportioned direct tax on wages because of it's ownership, which is strictly forbidden by the Constitution even today. They get away with it because of the ignorance of the people and the evil intent of the government. We are taught in school that the income tax is legal and we just assume that it is. The government knows the truth but will not revise their laws because that would be fair. In fact after studying this issue for over about seven years back in the 80's, I came to the conclusion that the Congress went out of their way to insure that no aspect of the tax is either moral, legal or Constitutional. I think they did this just to prove they could do it. A direct tax (per USC Art I, sec.8) is a tax on person or property because of it's ownership, and cannot be avoided. An indirect tax is one on the doing of the thing being taxed and can be avoided by merely not doing the thing being taxed. These are essential aspects of each tax. The rules of each tax are: if Congress lays a direct tax, it is really laid on the states (to collect), they must announce the amount to be collected, and each state must pay over a sum based on the porportion of the national census that reside in that state. In other words, if a state has 10% of the population of the country, they must pay 10% of the demanded sum. This is extremely fair as it comes down to an exact equal amount for every person in the whole country. The problem is that if the Congress laid the tax on wagons (for instance) and the state only had 2% of the wagons in the country, they would still owe 10% of the sum and everybody who owned a wagon would have to pay 5 times what those in another state would have to pay. For obvoius reasons when the Congress realized this they no longer laid a direct tax on things, only people. The last one that they laid this type of tax on was during the Second World War (the Victory Tax) which ended when the war did. It was a direct tax on wages and collected from our paychecks (sound familiar?). An Indirect tax must be laid geographicy uniform, which means that if (for instance) gasoline was being taxed, then someone buying it in Alaska or Florida or Main would pay the exact same tax per gallon. Indirect taxes never needed Apportionment. This was the whole purpose of taking a census in the first place. Then what is "Income"? The tax code doesn't say because it can't. The Supreme Court is the only entity who can define a word. Has it done that? Yes, in many cases, to the point that in the last one in which they did, they said they would not do it again. They declared "Income " to be profit gained through a privilage granted by government (like a license or corporation). They also said that net income, the taxable part, must first come from Gross proceeds where return of capital is subtracted, then to gross income from which tax deductions are deducted. We are then left with "net income" which is taxable. The question is now, are wages income or property? Therein lies the rub. The tax code remains neutral, the Supreme Court hasn't (except for the Pollach decision in a concurring opinion), but the IRS has generously filled our dilema. They say that everything is income unless they say. Some State Supreme Courts have declared that wages are not income but are a return of capital entirely but the IRS obviously disagrees. I hope that this clears up some confusion rather than creates more. The fairness of the Constitutional methods of taxing the people is obvious and I think we shoudl return to them if we are to be taxed at all.
All:
There is a lot of mis-information here, which I suppose is not uncommon. The 16th Amendment did not make Income taxes legal, nor did it allow for income taxes to be assessed withut apportionment. What it did is to make the taxing of income from different sources untaxable at different rates. That's all. (see "Brushaber vs. Union Pacific" 240 US 1) The purpose of passing the amendment was to get around the Pollach decision of 1895, which it did not. The Pollach decision declared the income tax of 1894 Unconstitutionalbecause th eact failed to separate the income (profit portion) of the returns from rent (on apartments and houses) from the return of capital part of the the rent. When one pays rent for housing, part of that rent represents a return of capital (for wear and tear) and that part is not profit (interest we would call it). The 16th did not change that although the congress thought that that was precisely what they were doing. The Supreme Court virtually laughed at them for this in the Brushaber case. Reading the Congressional Record from before and after the Amendment passed was a great education on the politics of public larceny I recommend to anyone. Only one Senator got it and gave a remarkable lecture to his fellows on taxation and it's history in this country.
Please note that today's "income"tax is not an income tax, but an unapportioned direct tax on wages because of it's ownership, which is strictly forbidden by the Constitution even today. They get away with it because of the ignorance of the people and the evil intent of the government. We are taught in school that the income tax is legal and we just assume that it is. The government knows the truth but will not revise their laws because that would be fair. In fact after studying this issue for over about seven years back in the 80's, I came to the conclusion that the Congress went out of their way to insure that no aspect of the tax is either moral, legal or Constitutional. I think they did this just to prove they could do it.
A direct tax (per USC Art I, sec.8) is a tax on person or property because of it's ownership, and cannot be avoided. An indirect tax is one on the doing of the thing being taxed and can be avoided by merely not doing the thing being taxed. These are essential aspects of each tax. The rules of each tax are: if Congress lays a direct tax, it is really laid on the states (to collect), they must announce the amount to be collected, and each state must pay over a sum based on the porportion of the national census that reside in that state. In other words, if a state has 10% of the population of the country, they must pay 10% of the demanded sum. This is extremely fair as it comes down to an exact equal amount for every person in the whole country.
The problem is that if the Congress laid the tax on wagons (for instance) and the state only had 2% of the wagons in the country, they would still owe 10% of the sum and everybody who owned a wagon would have to pay 5 times what those in another state would have to pay. For obvoius reasons when the Congress realized this they no longer laid a direct tax on things, only people. The last one that they laid this type of tax on was during the Second World War (the Victory Tax) which ended when the war did. It was a direct tax on wages and collected from our paychecks (sound familiar?).
An Indirect tax must be laid geographicy uniform, which means that if (for instance) gasoline was being taxed, then someone buying it in Alaska or Florida or Main would pay the exact same tax per gallon. Indirect taxes never needed Apportionment. This was the whole purpose of taking a census in the first place. Then what is "Income"? The tax code doesn't say because it can't. The Supreme Court is the only entity who can define a word. Has it done that? Yes, in many cases, to the point that in the last one in which they did, they said they would not do it again. They declared "Income " to be profit gained through a privilage granted by government (like a license or corporation). They also said that net income, the taxable part, must first come from Gross proceeds where return of capital is subtracted, then to gross income from which tax deductions are deducted. We are then left with "net income" which is taxable.
The question is now, are wages income or property? Therein lies the rub. The tax code remains neutral, the Supreme Court hasn't (except for the Pollach decision in a concurring opinion), but the IRS has generously filled our dilema. They say that everything is income unless they say. Some State Supreme Courts have declared that wages are not income but are a return of capital entirely but the IRS obviously disagrees.
I hope that this clears up some confusion rather than creates more. The fairness of the Constitutional methods of taxing the people is obvious and I think we shoudl return to them if we are to be taxed at all.
Donald Lingerfelt:if Congress lays a direct tax, it is really laid on the states (to collect), they must announce the amount to be collected, and each state must pay over a sum based on the porportion of the national census that reside in that state. In other words, if a state has 10% of the population of the country, they must pay 10% of the demanded sum. This is extremely fair as it comes down to an exact equal amount for every person in the whole country.
The above is what I was trying to get at. This is the best form of taxation for federal purposes, since it empowers each state to determine the method by which it will collect the tax, allowing for innovation and competition amongst the states.
Thank you very much for the education.
Jason Dean: Donald Lingerfelt:if Congress lays a direct tax, it is really laid on the states (to collect), they must announce the amount to be collected, and each state must pay over a sum based on the proportion of the national census that reside in that state. In other words, if a state has 10% of the population of the country, they must pay 10% of the demanded sum. This is extremely fair as it comes down to an exact equal amount for every person in the whole country. The above is what I was trying to get at. This is the best form of taxation for federal purposes, since it empowers each state to determine the method by which it will collect the tax, allowing for innovation and competition amongst the states.Thank you very much for the education.
Donald Lingerfelt:if Congress lays a direct tax, it is really laid on the states (to collect), they must announce the amount to be collected, and each state must pay over a sum based on the proportion of the national census that reside in that state. In other words, if a state has 10% of the population of the country, they must pay 10% of the demanded sum. This is extremely fair as it comes down to an exact equal amount for every person in the whole country.
What is your take on race to the top/race to the bottom theory. As this seems to be the most debatable issue on competitive taxation...
Goldenboy219:What is your take on race to the top/race to the bottom theory. As this seems to be the most debatable issue on competitive taxation...
I'm unfamiliar with what you mean, exactly. I'm assuming that one of the races represents higher taxation, and the other lower, but I'm unfamiliar with the theory. Do you have a link?
I thought the race to the bottom argument had to do with international trade rendering everyone poorer ultimately. Anyway, yes, welfare states do tend to attract immigrants, and in fact, they have to. This, of course, increases their tax burden, and further discourages investment. These countries stagnate and eventually melt down.
For anyone who hasn't read it yet I recommend Charles Adams book For Good and Evil, which is a history of taxation. One of the points he makes is that all types of taxes require invasions into the freedoms of the citizen. Adams concludes that the type of tax really doesn't matter. What matters according to him is that the rates should be low. I don't completely agree with this though. If I don't pay my property tax they take my property. If I don't pay my excise tax they take my goods. But if I don't pay my income tax they take me!
DBratton: If I don't pay my property tax they take my property. If I don't pay my excise tax they take my goods. But if I don't pay my income tax they take me!
Surely you are not seriously directly comparing taxes to a market price?
... In a sense I compare them to a monopoly price. Or rather like a mark up cost of living, working and doing business in a country.
Torsten:And if you don't pay your ticket at the entrance they kick out of the cinema.
But with taxes I have to buy a ticket even if I own the cinema.
Taxes are not fees like others. I don't have a choice to opt out. And I have to pay whether I benefit or not.
In fact, you have to pay in inverse relation to the benefit you get: people who benefit most from taxation don't pay taxes, the people who benefit the least (most negatively) from taxation pay the most.
Paul:In fact, you have to pay in inverse relation to the benefit you get: people who benefit most from taxation don't pay taxes, the people who benefit the least (most negatively) from taxation pay the most.
That's pretty surprising coming from someone on this board. After all, when you factor in the hidden tax of inflation, those who pay the lowest amount of "taxes" are actually victimized the most, while many in the upper echelons of the economic ladder, who nominally pay high taxes, get much more benefits than they pay for.
DBratton: But with taxes I have to buy a ticket even if I own the cinema.
DBratton: Taxes are not fees like others.
DBratton: I don't have a choice to opt out.
DBratton: And I have to pay whether I benefit or not.
Given the existing power relation in a current taxes are indeed a coerced means of income for the government and its employees as well as cronies...
Jason Dean:Why is it that no one advocates the repeal of the 16th, with the government simply assessing tax liabilities to the states?
Why is it that no one advocates the repeal of the 16th, with the government simply assessing tax liabilities to the states?
I advocate the repeal of the 16th, but nobody listens to me. :) Frankly, instead of passing taxes to the states, I think the Federal government should be stripped of all authority to tax. If the politicians want money, let them get on TV and beg for it. Let 'em hold a telethon.
Matthew Graybosch:I advocate the repeal of the 16th, but nobody listens to me. :) Frankly, instead of passing taxes to the states, I think the Federal government should be stripped of all authority to tax. If the politicians want money, let them get on TV and beg for it. Let 'em hold a telethon.
Well you know I like this idea, but I think mine is actually very similar. Right now you have these "Fair Taxers" who want to reform the tax code. I think the argument can be made to them -- "Hey, why have a national sales tax when we can let each state decide how its portion of taxes should be collected?" Signing on with something like the Fair Tax is a betrayal of libertarian principles, but stripping the federal government's power to lay direct taxes and decentralizing that authority is not. The outcome would be this: The states would re-emerge as sovereign entities, putting pressure on the feds to cut spending. There would be some classical tension between the feds and the states. The difference between my plan and yours is that my plan could potentially capitalize on the tax reform fervor that is quite sizeable.
A good (and I use this term relatively) alternative to the income tax would be a subsidy from the citizens to the government. In the feudal ages, kings had to call an assembly of men respected in the community to basically beg them for money. They had no authority to tax by their own power but had to ask first, and the subsidizer had conditions to their giving of money (such as the king promising not to put impurities in the money supply.) While not perfect, this would put some serious restrictions on the power of the government.
Nobody held a sword to my throat and forced me to see Beowulf this weekend. If I do not want to pay taxes, then I have to abstain from all economic activity; emigration is not an option, as every allegedly civilized country on Earth levies taxes.