Difference between revisions of "American Government Lecture Eleven"

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The distinction between "direct" and "indirect" taxes is important because the original U.S.Constitution, in Art. I, Section 9, Clause 4, limits "direct" taxes to the federal government to what can be apportioned among the population.  This prevents the federal government from taxing wealthy areas or people more than poor areas or people.  If a tax is "indirect", then it is not limited by this provision, which enables the federal government to tax business activity without limitation.  But with respect to individual income, the Sixteenth Amendment gives the federal government unlimited power to impose taxes in any way it chooses.
 
The distinction between "direct" and "indirect" taxes is important because the original U.S.Constitution, in Art. I, Section 9, Clause 4, limits "direct" taxes to the federal government to what can be apportioned among the population.  This prevents the federal government from taxing wealthy areas or people more than poor areas or people.  If a tax is "indirect", then it is not limited by this provision, which enables the federal government to tax business activity without limitation.  But with respect to individual income, the Sixteenth Amendment gives the federal government unlimited power to impose taxes in any way it chooses.
  
The lawsuits against ObamaCare have reopened this issue because ObamaCare imposes a tax based on whether someone purchases health insurance.  It is not an income tax, so it should not be authorized by the Sixteenth Amendment.  It is not an excise tax, because it applies when there is no activity (declining to purchase government-approved insurance).  Is it a "direct" tax?  If so, then it would not be allowed unless it is apportioned by population, such that wealthy people pay no more than poor people.  Lawsuits are pending to challenge ObamaCare based on what kind of tax it imposes, and the federal courts will be deciding this issue in the next year or so.
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The lawsuits against ObamaCare have reopened this issue because ObamaCare imposes a penalty (under Congress's taxation power) on non-exempt people who fail to purchase adequate health insurance.  It is not an income tax, so it should not be authorized by the Sixteenth Amendment.  It is not an excise tax, because it applies when there is no activity (declining to purchase government-approved insurance).  Is it a "direct" tax?  If so, then it would not be allowed unless it is apportioned by population, such that wealthy people pay no more than poor people.  However, Article I, Section 8, Clause 1 states "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises." Lawsuits are pending to challenge ObamaCare based on what kind of tax it imposes, and the federal courts will be deciding this issue in the next year or so.
  
 
'''II. Race.'''
 
'''II. Race.'''

Revision as of 12:30, 1 January 2013

American Government Lectures - [1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12]


<under development>

Government and politics affects nearly every aspect of society. Violent video games? The U.S. Supreme Court, by a narrow 5-4 majority, said that they are protected as free speech under the First Amendment. Of course, that does not make violent video games right, but it does affect how many people play them, and whether state legislatures can pass laws limiting their use by children.

How are churches affected by government and politics? The free exercise clause of the First Amendment protects churches in many ways. Taxation of church property and minister's salaries are not allowed. What is said in a church receives greater protection against government regulation than what is said in a business. The police are reluctant to search a church; judges are reluctant to issue a search warrant for them to do so. In a 9-0 ruling, the U.S. Supreme Court recently held that churches can fire key employees for almost any reason, without having to worry about the regulations and laws that apply to businesses.

A good understanding of government and politics also enables students to understand American history better, and to recognize the differences between the state today. Why was Philadelphia the biggest and most prosperous city in the colonial era? It was the colony that welcomed settlers the most, and was based on strong Christian principles. Only Philadelphia prohibited gambling, and such moral values enabled it to thrive and prosper. Its founder, William Penn, learned first-hand in England the consequences of interference with the free exercise of religion. Fortunately, he was acquitted of the criminal charges against him due to jury nullification.

This lecture we review and build on what we have already learned.

The Supremacy Clause

Perhaps the most important clause of the U.S. Constitution is in Article IV, known as the "Supremacy Clause":

Constitution and the laws of the United States...shall be the supreme law of the land ... anything in the constitutions or laws of any State to the contrary notwithstanding.

The meaning of this provision is that all federal law, rules, regulations and federal court decisions "trump" (preempt) any state law that is contrary.

Let's take a simple example. Suppose a conservative School Board for a public school district passed a rule allowing teachers in its public schools to hold classroom prayer. The school board observes that it has the authority to set the rules for teachers and students in its school district. Would that new rule about classroom prayer be enforceable?

No, because of the Supremacy Clause, which requires that the federal court decision by the U.S. Supreme Court in Engel v. Vitale take precedence, preempt and trump the local law to the contrary.

That was an obvious example. Here is an example that is not so obvious. In 1816, Congress and the President established The Second Bank of the United States. In 1818 the State of Maryland sought to impose taxes on that bank for its operations within Maryland. The national bank challenged the tax, and the case ended up in the U.S. Supreme Court for a final decision.

In a 7-0 decision, the U.S. Supreme Court held that the Second Bank of the United States could not be taxes by any of the States, due to the Supreme Clause. (There were only 7 Supreme Court Justices then; today there are 9. Federal statutes, which can be changed, establish how many Justices will comprise the U.S. Supreme Court.)

The decision, written by Chief Justice John Marshall, emphasized that federal law takes precedence over state law. While states have the authority to impose taxes, states are prevented by the Supremacy Clause from taxing the federal government or entities that it creates.

This decision, entitled McCulloch v. Maryland (1810), contains this famous truth:

The power to tax is the power to destroy

This McCulloch v. Maryland decision is important for another reason too. The Court held that Congress has unenumerated powers that are not expressly given to it by the U.S. Constitution. Nowhere in the Constitution is the power to create a national bank given to the federal government. But under the "Elastic Clause" (also known as the "Necessary and Proper Clause") of the U.S. Constitution, Congress has the power to "make all laws which shall be necessary and proper for carrying into execution." That clause has been used repeatedly by Congress to make laws where it does not have an express grant of power by the Constitution to do so.

"The Power to Tax"

All States have the full authority to tax individuals and businesses, and there are many examples of that today: income taxes, sales taxes, tolls on roads, and even taxes on services like pest control.

The colonies/states were reluctant to give the power to tax to the new national government in the 1780s. The first attempt at a national government, through the Articles of Confederation, did not give the United States government the power to tax. Instead, it was voluntary: the national government requested funding from the States on a voluntary basis. That was not successful, especially when times were difficult after the American Revolution. The national government under the Articles of Confederation in the mid-1780s struggled simply to raise money for its operations.

The U.S. Constitution give the new national government the authority to raise money by taxing imports (goods shipped from foreign nations) and interstate commerce, and denied the States their longstanding power to raise money in that manner. This was a massive shift in power from the States to the federal government. Rhode Island refused for several years, even after George Washington was president, to ratify the Constitution and join the United States, because Rhode Island raised its money by taxing imports into its harbors along the Atlantic Ocean (including the slave trade). (The Constitution does prohibit any taxes on exports -- goods shipped from our Nation to foreign nations -- by the federal government.)

But the original U.S. Constitution limited the power of the government to tax individuals, in Art. I, Section 9, Clause 4:

No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

This meant that a direct income tax on individual Americans could only be imposed in proportion to how many people lived in an area, rather than in proportion to how much money they make. Wealthy areas could not be taxed more than poor areas. As result, the federal government could not easily impose an income tax like what exists today.

Instead, the federal government taxed real estate, slaves, carriages, and things other than income. But this did not amount to much revenue for the federal government. Most of its revenue through the late 1700s and 1800s was in the form of tariffs: taxes on imports.

In 1895, a close vote by the U.S. Supreme Court invalidated a federal income tax because it was a direct tax that was not apportioned as required by the U.S. Constitution. Pollock v. Farmers' Loan & Trust Co. Congress continued to be without the power to impose a federal income tax for nearly another two decades.

Then, in 1909, Congress passed the proposed Sixteenth Amendment to give it the power to impose income taxes without limitation. Because Congress does not have the power to amend the Constitution by itself, this went to the States for ratification. At that time there were 48 States (Hawaii and Alaska had not yet joined), so the 3/4 requirement for ratification of a new amendment was 48 times 3/4, which equals 36 States.

The Sixteenth Amendment removes the limitation on income taxes by the federal government that was in the original Constitution. The Sixteenth Amendment states:

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.

Some states opposed ratification of this Amendment, which had the effect of transferring enormous power to the federal government. It took nearly four years for this amendment to be ratified by 3/4 of the States in 1913.

Types of taxes

There are two general categories of taxes, "direct" and "indirect".[1] A "direct" tax is how the Roman Empire funded itself: each adult must directly pay a certain tax, whether he has income or not. Jesus and the Apostles had to pay to this too, as they were in the Roman Empire. Another example of a "direct" tax is a tax on real estate, which the federal government imposed in its early years but now which are imposed almost entirely by State and local governments.

Most taxes are "indirect" in nature, such as "excise taxes." An excise tax is based on an activity, such as a sale of a product from a business to a customer. It is a tax on activity rather than on a person or on property itself. An example of indirect or excise federal taxes are the taxes on gasoline and telephone bills.

The distinction between "direct" and "indirect" taxes is important because the original U.S.Constitution, in Art. I, Section 9, Clause 4, limits "direct" taxes to the federal government to what can be apportioned among the population. This prevents the federal government from taxing wealthy areas or people more than poor areas or people. If a tax is "indirect", then it is not limited by this provision, which enables the federal government to tax business activity without limitation. But with respect to individual income, the Sixteenth Amendment gives the federal government unlimited power to impose taxes in any way it chooses.

The lawsuits against ObamaCare have reopened this issue because ObamaCare imposes a penalty (under Congress's taxation power) on non-exempt people who fail to purchase adequate health insurance. It is not an income tax, so it should not be authorized by the Sixteenth Amendment. It is not an excise tax, because it applies when there is no activity (declining to purchase government-approved insurance). Is it a "direct" tax? If so, then it would not be allowed unless it is apportioned by population, such that wealthy people pay no more than poor people. However, Article I, Section 8, Clause 1 states "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises." Lawsuits are pending to challenge ObamaCare based on what kind of tax it imposes, and the federal courts will be deciding this issue in the next year or so.

II. Race.

In 2004, Howard Dean thought he was helping his candidacy when he repeatedly declared that "I still want to be the candidate for guys with Confederate flags in their pickup trucks. We can't beat George Bush unless we appeal to a broad cross-section of Democrats."

His statements drew hearty applause from Democratic crowds. After all, the Confederacy was the stronghold of the Democratic party in 1860, and remained its political base for over a hundred years later.

But then the media jumped on the issue, encouraged by Dean's Democratic opponents. The Confederate flag represented the South, and the South protected slavery. After the Civil War, the South was the battleground for African-Americans seeking full civil rights. Until the 1960s there were still practices in the South excluding blacks from lunch counters, public schools and even seats near the front of buses.

Segregation was common nationwide in the school system until the Supreme Court ruled that it was illegal in Brown v. Board of Educ. (1954). In that case the National Association of Colored People (NAACP) brought a lawsuit on behalf of an 11-year-old girl, Linda Brown, who was ordered by the Topeka, Kansas school board to attend an all-black public school. Like the bloodshed that sparked the Civil War, Kansas once again was on the front line of the racial struggles.

The Supreme Court ruled "that in the field of public education the doctrine of 'separate but equal' has no place." Prior to 1954, schools were allowed to separate white and black students into different schools under the theory that the schools were "separate but equal." Chief Justice Earl Warren wrote for the Supreme Court in ruling that segregated schools were "inherently unequal" and therefore a violation of the 14th Amendment.

In the following year, 1955, the Supreme Court ordered an end to segregation in the public schools "with all deliberate speed." But it took until the end of the 1960s to eliminate segregation in all schools and also in transportation, restaurants and hotels.

By the 1960s federal courts began to order busing to attain greater integration in public schools. Many schoolchildren were transported far from their homes to attend another public school, simply for the purpose of improving racial balance. School districts that had segregated students by race in the past were subjected to busing. New school districts, typically in the suburbs, were not required to bus because they had no history of segregation.

Busing soon became an enormous political issue, even influencing the presidential election. In the summer of 1972, Congress passed a law delaying any orders by federal courts to desegregate public schools until all appeals were heard and decided. This prevented a single federal judge from forcing neighborhoods to bus their children to distant schools. A few months later, in the presidential election in Nov. 1972, Nixon was elected in a landslide based in part on his criticism of busing. He swept the southern states that had traditionally been Democratic.

Race remains an enormous issue in American politics, fueled by media attention. A single comment about ethnicity can destroy a politician or anyone connected with the media. New York Senator Alfonse D'Amato won his seat in a tough race in 1992 by emphasizing how his opponent publicly called him a "fascist". D’Amato said that was a racial slur against his Italian heritage. He won as voters did not want to elect someone charged with making racial comments. But six years later, in 1998, his new opponent Charles Schumer used the same argument against him. D'Amato had insulted Schumer with a Yiddish slur, who then made it look like a racial insult in the media. Schumer thereby won just as D'Amato had six years earlier.

In 2008, race became a big issue in the presidential election. Barack Obama won the presidency in part by benefiting from an enormous "turnout" (percentage of people who actually vote) by African Americans, 95% of whom voted for him. Predictions of racism by American voters were completely wrong: Obama did as well or even better than polls predicted.

Answer to Question at the beginning of the lecture about which American colony did not allow any gambling: Pennsylvania, the home of the Quakers and freedom of religion.

Homework

Answer the first five questions, and then two of the remaining three, for a total of seven questions:

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Extra credit (answer two of the following five questions):

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You can post your answers at American Government Homework Eleven.
  1. http://www.investorguide.com/article/11164/the-difference-between-direct-tax-and-indirect-tax/