Your Tax Debt Actually has a Constitutional Basis

When Benjamin Franklin made his famous quote in a letter to a friend, “In this world nothing can be said to be certain, except death and taxes,” he probably never envisioned our modern income tax system. In fact, the American Revolution could be described as a struggle against being taxed by a detached monarch and his greedy Parliament. American colonists fought to get out from under one tax debt, and we, their descendants, have created a federal income tax structure far beyond their wildest imagination.

How we got here

Our Constitution in its original form has a provisions for raising taxes to run the federal government. The problem was that Article 1, Section 8, which permitted Congress to raise taxes seemed to conflict with Article 1, Section 2 (Clause 3). The latter provision made it difficult to Congress to impose an individual income tax because it required an apportionment taxation based on population. So, for about four score and seven years of our nation’s history, most of our federal taxes came from liquor, tobacco, sugar, slaves, and tariffs.

The Civil War was the precedent

Congress passed the country’s first income tax law in 1862 and didn’t appear to be bothered by the aformentioned constitutional conflict. (No surprise there, because many civil war protestors were thrown in jail without trial and the benefit of habeas corpus during that time.) The first income tax was a 3 percent tax on those who earned from $600 to $10,000 a year (big money back then). By 1866, tax collections reached a whopping $310 million (really, really big money).

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First income tax abolished

After the Civil War Congress decided that taxing tobacco and liquor was enough to keep the government running, and in 1872 (during the Grant Administration) did away with personal income taxes. After two short-lived resuscitations in 1894 and 1895, the Supreme Court stepped in and ruled that the income tax was unconstitutional because it was not apportioned according to Article 1, Section 2.

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The 16th Amendment changed the rules.

In 1913 Congress succeeded in its effort to “pencil whip” the problem when the required three-fourths of the states ratified the 16th Amendment to the Constitution. This amendment gives no new powers to Congress regarding collecting taxes; it merely dropped that inconvenient apportionment provision.

The behemoth we created

From its original form of about 900 pages in 1913 to today’s astonishing over-70,000 pages our federal tax code is so vast that no one person could possibly master it. Nevertheless, personal income taxes for 2011 have accounted for an staggering $1.27 trillion in 2011. Even more astonishing is the fact that the federal deficit for fiscal year 2011 was about that same amount. Old Ben Franklin was right, but if he knew how right he was, he would roll over in his grave.