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| | == "The Power to Tax" == | | == "The Power to Tax" == |
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| − | 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. | + | All States have the full authority to tax individuals and businesses, and there are many examples today: income taxes, sales taxes, tolls on roads, and even taxes on services like pest control. |
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| − | 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 colonies/States were reluctant to give this 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 to raise money for its operations. |
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| − | 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.) | + | The U.S. Constitution gives the new national government the authority to raise money by taxing imports (goods shipped here from foreign nations) and interstate commerce, and denied the States their longstanding power to raise money in this 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 the federal government from taxing exports -- goods shipped from our Nation to foreign nations.) |
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| | But the original U.S. Constitution limited the power of the government to tax individuals, in Article I, Section 9, Clause 4: | | But the original U.S. Constitution limited the power of the government to tax individuals, in Article I, Section 9, Clause 4: |
| | {{cquote|No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.}} | | {{cquote|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. | + | This meant that a direct income tax on individual Americans could be imposed only 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, where the wealthy pay more than the poor. |
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| − | 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. | + | Instead, the federal government in the late 1700s 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 1800s was in the form of tariffs: taxes on imports. |
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| − | 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. | + | In 1895, a close vote by the U.S. Supreme Court invalidated a new 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.'' (1895). Congress continued to be without the power to impose a federal income tax for nearly another two decades. |
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| − | 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. | + | Then, in 1909, Congress passed the proposed Sixteenth Amendment to give itself 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. |
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| | The Sixteenth Amendment removes the limitation on income taxes by the federal government that was in the original Constitution. The Sixteenth Amendment is as follows: | | The Sixteenth Amendment removes the limitation on income taxes by the federal government that was in the original Constitution. The Sixteenth Amendment is as follows: |
| | {{cquote|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.}} | | {{cquote|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.}} |
| − | Many Americans 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. | + | Many Americans opposed ratification of this Amendment, which had the effect of transferring enormous power to the federal government. It took nearly four years for this Sixteenth Amendment to be ratified by 3/4 of the States, in 1913. |
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| − | === Types of taxes ===
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| − | There are two general categories of taxes, "direct" and "indirect".<ref><small>http://www.investorguide.com/article/11164/the-difference-between-direct-tax-and-indirect-tax/</small></ref> 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.
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| − | 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.
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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.
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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. But if it is not a direct tax, then Article I, Section 8, Clause 1 may allow it: "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.
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| | == "One man, one vote" == | | == "One man, one vote" == |