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| | Despite how much the federal government has grown, much remains unregulated in American life. We do not have racial quotas in business, though there is affirmative action to encourage greater participation by minorities in institutions like colleges and large corporations. We do not have "comparable worth" by which the government would set equal wages for men and women. We do not have the 14th Amendment applying to purely private activities, like the Boy Scouts. Struggles continue on both sides of these and other controversies, but America remains by far the most free major country in the world. | | Despite how much the federal government has grown, much remains unregulated in American life. We do not have racial quotas in business, though there is affirmative action to encourage greater participation by minorities in institutions like colleges and large corporations. We do not have "comparable worth" by which the government would set equal wages for men and women. We do not have the 14th Amendment applying to purely private activities, like the Boy Scouts. Struggles continue on both sides of these and other controversies, but America remains by far the most free major country in the world. |
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| − | == For Honors Students: Direct and Indirect Taxes == | + | == The Funding of Government: 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 (also known as a "head tax" or "capitation tax," because it is applied per person). Jesus and the Apostles had to pay this type of tax, 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 does not anymore. (Now State and local governments impose real estate taxes.)
| + | Government needs funding in order to run, and the lack of funding for the federal government under the Articles of Confederation was a problem. Here is a brief look at the two types of taxes used to fund government: "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 (also known as a "head tax" or "capitation tax," because it is applied per person). Jesus and the Apostles had to pay this type of tax, because 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 does not anymore. (Now State and local governments impose real estate taxes.) |
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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.
| + | Many 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 in 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. | + | 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 by the federal government to what can be apportioned among the population. This prevents the federal government from taxing wealthy people more than poor 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. The Sixteenth Amendment gives the federal government unlimited power to impose income taxes in any way it chooses, enabling it to require wealthy people to pay far more in taxes than poor people pay. |
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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. | + | The lawsuits against ObamaCare have reopened this issue because ObamaCare imposes a penalty (under Congress's taxation power) on people who decide not to purchase adequate health insurance. This is not an income tax, so it should not be authorized by the Sixteenth Amendment. This 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. If it is an "indirect tax," then it may be allowed under Article I, Section 8, Clause 1: "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 federal courts will be deciding this issue in the next year or so. |
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| | == Conclusion and Review== | | == Conclusion and Review== |