RANCHO SANTA FE, Ca., April 14, 2014 – It’s that time of the year again: The time when people scramble to file their taxes and pray that they don’t owe anything beyond what they’ve already paid. While our Government demonstrated fiscal responsibility for the first 125 years of its existence, the Sixteenth Amendment created a feeling of euphoria and power among our elected officials that quickly became addictive.
The Sixteenth Amendment states as follows:
“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.”
Prior to the Sixteenth Amendment, our Legislative Branch’s authority to raise funds to pay debt was governed by Article I, Section 8 of the Constitution, which prescribes:
“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.”
One might argue that the Sixteenth Amendment is little more than a clarification of Congress’ right to “lay and collect Taxes” under Article I, Section 8. However, that begs the question of why it was even needed.
In application, the Sixteenth Amendment marked a fundamental change in the way Government functioned. It provided a rich new capital resource that could be accessed without the same degree of care required by the imposition of “Duties, Imposts and Excises.”
What has evolved is not a system of “taxation without representation,” as gave rise to the original Tea Party, but rather one of “taxation with poor representation.” Perhaps this explains the resurrection of the term “TEA Party” which, before the movement was compromised to represent “all things ultra-conservative,” initially used the acronym “TEA” to suggest that we had been “Taxed Enough Already.”
For those who dislike the TEA Party, please understand that it probably never would have come into existence had Congress demonstrated even a modicum of fiscal responsibility. In that regard, it’s similar to the Occupy movement, which likely would not have come into existence if Wall Street had acted with a reasonable degree of ethical responsibility. Rather than jumping to the conclusion that either of these movements is inherently evil, perhaps we should consider what drove their existence and try to rectify the problems.
If we were to compare income tax to an illegal drug, cocaine would probably provide the best analogy. Cocaine is generally perceived to be a designer drug for the rich as compared to heroin, which is generally associated with the poor. Similarly, many people currently believe that the imposition of an income tax should only be associated with the rich.
It wasn’t always this way. There was a time when the word “fair” implied “equal.” Almost every citizen dreaded April 15th but recognized that they bore a responsibility to participate in the funding of our Nation. Today, the word “fair” has evolved to define an entitlement among some and a burden among others. This begs the rhetorical question: “Is that fair?”
Franklin D. Roosevelt once said, “Taxes, after all, are dues that we pay for the privileges of membership in an organized society.” Yet, nearly half the citizens of the United States do not pay any federal income tax.
Accordingly, there should be little surprise that many of them are not concerned with the frightening degree to which our country has incurred debt under the last two Administrations. The Bush Administration raised our National Debt to a level that surpassed the cumulative National Debt of all prior Administrations. Not to be outdone, the Obama Administration saw that bet and raised it by establishing a level of debt that surpassed the cumulative National Debt of all prior Administrations including that of President Bush. The “drug” of taxation is astoundingly addictive and creates a delusional belief that its negative symptoms (such as excessive spending) can be overcome by a higher dosage (i.e., higher taxes).
While it would be easy to blame our plight on the Government from a generic perspective, it is probably more appropriate to recognize that Party politics have played a major role in how income tax has been abused much like individuals abuse drugs.
Consider the similarities between drug cartels and our political Parties. Cartels work hard to establish and protect their territories; the Parties work hard to establish and maintain their constituencies. Cartels use dealers to distribute their products; the Parties use members of the House and Senate to exact taxes. Cartels use intimidation and heavily armed enforcers to maintain a sense of fear and to collect debt; the Parties use the IRS. Finally, both the Parties and cartels are driven by an unquenchable appetite for power and money and neither allows moral absolutes to interfere with the satiation of that hunger.
However, there are also some marked differences. Cartels provide a product that is desired by those who wish to use it, whereas the Parties provide a “product” that more directly inures to their benefit (i.e., using funds to pay for programs that can be exploited to maintain and grow support). Additionally, cartels have to sell their product while the Parties can simply dictate the application of theirs.
In 1913, the Sixteenth Amendment was more of a gateway drug. One could argue that it was initially offered for medicinal purposes (i.e., to alleviate some of the political pain associated with the application of “Duties, Imposts and Excises”). However, once the Parties recognized that the “drug” could be administered without permission, their addiction to its use began to grow.
The first tax structure, when adjusted for inflation, reflected a 1% tax on incomes up to $474,305.05 with a maximum tax of 7% on incomes exceeding $11,857,626.26 (in 2014 dollars). Over the years, that dosage no longer satisfied the Parties’ cravings. As a result, today, the lower marginal rate resides at 10% and scales to 39.6% for single filers with taxable income over $400,000 ($425,000 for heads of households).
In all fairness, the Democratic Party is the more honest of the two when it comes to taxation. In recent history, it rarely has seen a tax it didn’t openly like.
The Democratic Party recognizes the political advantage that can be established by financing programs that foster a dependency upon ongoing subsidization as opposed to an approach that might actually solve a problem. If this were not true, minorities, who have been negatively impacted by the recent recession in such an extraordinarily disproportionate manner, might not surrender their votes so willingly to the Democratic Party that has clearly failed them.
Correspondingly, women might be more inclined to challenge the Administration’s failure to give birth to equal pay within the walls of the White House as opposed to worrying about access to free contraception, and the unemployed might be demanding access to jobs rather than extended benefits.
Perhaps benefits and subsidies have become the real drugs of the People and taxes are just a “necessary evil” to fund the habit.
Of course, the Republican Party isn’t any better; it’s just less honest. It hasn’t been able to stand up and say, “We’re the Republican Party, and we have a problem.” It still resides in a perpetual state of denial; pretending only to be a “social user” of taxes.
While the Democratic Party “mainlines” taxes into the veins of the system, the Republican Party does its “lines” in the privacy of deductions and credits tailored to its base. In effect, it “cuts” taxes to prolong their effect (i.e., to extend its impact on political fundraising, etc.).
Clearly, both Parties desperately need to enter a rehabilitation program. If you need more evidence, consider the fact that Lindsay Lohan supported then-Senator Barack Obama in 2008 and Mitt Romney in 2012.
So, what can be done to correct the situation?
What if our elected officials honored their Oaths and relied upon the Constitution? (See: Will we survive the real Cold War? – Feb. 24, 2014.) Specifically, what if they applied Article I, Section 8, and restricted their expenditures to programs that “provide for the common Defence and general Welfare of the United States”?
Think about that.
To use an analogy: The Federal Government is similar to an insurance company and taxes are akin to insurance premiums.
If a major country attacked Rhode Island and Rhode Island was left to defend itself, Rhode Island would lose. However, if that same attack were launched upon Rhode Island as one of the “united” States, Rhode Island (a.k.a. the United States) would win. In summary, the defense of each individual State is “insured” by the collective power of those States operating in unity.
Next, consider a natural disaster from which an individual State might not otherwise be able to recover (e.g., hurricanes Katrina and Sandy or the tornado or wildfire of your choice). Just as your home is insured against fire, each State is insured against circumstances that could result in a catastrophic loss. Our taxes create a pool of funds to offset such losses just as insurance premiums do in our daily lives.
As for programs that go beyond the realm of traditional insurance, the same standard would apply: Programs would have to be structured for “the general Welfare of the United States” rather than for a political constituency. If a program did not address the needs of citizens across the United States in a uniform manner (as opposed to favoring a few), it would not be eligible for federal tax funding.
Note: this would not preclude such a program from being established by one or more States under the Tenth Amendment or through the charitable will of the People under the Ninth Amendment.
This simple application of the law, as it is written, would eliminate an enormous amount of infrastructure and expense at the federal level, reestablish power at the State level, and reserve the residual decisions to the People where they belong. The Parties would no longer be able to use taxpayer dollars to fund political larks aimed at securing the votes of their constituents.
It might even drive some of the corruption out of Government, and it certainly would lower the return on investment for the Political Action Committees that so lavishly spend money on our elected representative to curry the favor of a “designer program” meant to benefit only a PAC’s donor base.
As Will Rogers once said, “The difference between death and taxes is death doesn’t get worse every time Congress meets.” Truer words were never spoken.
It’s time to deal with the issue before we are confronted with a debt structure that doesn’t offer a positive resolution. Simplify the tax code? Eliminate certain credits and deductions? Transition to a Fair Tax or Flat Tax system? What are your recommendations? Please join the discussion in the Comment Section below. Otherwise, the Government will continue to tax your patience.
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T.J. O’Hara is an internationally recognized author, speaker, and strategic consultant in the private and public sectors. In 2012, he emerged as the leading independent candidate for the Office of President of the United States and the first nominee of the Whig Party in over 150 years.
This article first appeared in T.J. O’Hara’s recurring column, A Civil Assessment, in the Communities Digital News (CDN).