(FairTax.org) The federal income tax was established in 1913. It actually required an amendment to the United States Constitution to make it legal. Why? Our Founding Fathers believed that taxing individuals on their private income was economic folly. They were right. The absence of an income tax, a tax on productivity, allowed our economy to grow and individuals to prosper for 124 years.
The original income tax legislation affected only individuals earning $4,000 or more per year, at a time when the overwhelming majority of Americans earned far less. The 16th Amendment was eventually ratified and added to the Constitution, and a national income tax was born.
That 16th Amendment was simply worded, the tax return consisted of only one page, and the entire tax code itself consisted of only 14 pages. No one could have imagined the vast impact it would have on the lives of their children, grandchildren, and future generations of Americans.
Since then, the federal income tax system has become so complex that it requires tens of millions of Americans to seek professional help to comply with it, not to mention the enormous, expensive federal bureaucracy required to enforce and administer the tax. The Internal Revenue Service employs more investigative agents than the FBI and the CIA combined, and with 144,000 employees, employs more people than all but the 36 largest corporations in the United States.
In addition to the $10 billion needed to operate the IRS, at least $265 billion (that is $900 for every man, woman, and child in this country) must be added to account for the cost of complying with the tax code. Massive amounts of our national wealth are consumed merely by measuring, tracking, sheltering, documenting, and filing our annual income.
Back in 1913 the 16th Amendment was made part of the Constitution. The language is very short: “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.” In other words, a direct tax.
It just goes to show it doesn’t take 2700 pages to destroy the dream. It can be done in a single sentence.
The story of the 16th amendment is amusing, if you like dark humor.
Washington needed a Constitutional Amendment because up until 1913, the Supreme Court had ruled that an income tax would be unconstitutional. Now here’s where it gets political:
The idea of a tax to “soak the rich” began to take root among liberals of both parties. (sound familiar so far?) Then, as now, the Republican Party had the reputation for being the party of the rich, but Republican Wm Howard Taft was forced to declare that an income tax might be alright “in principle” even though he was privately opposed.
In 1909 a conservative Democrat from Texas, Joseph Bailey, introduced a bill to embarrass the Republicans by voting against an income tax. Bailey himself was against an income tax. However to Bailey’s amazement, Teddy Roosevelt and a growing number of Republican liberals came out in favor of the bill, and it looked as though it was going to pass. Old line Republicans Sen. Nelson Aldrich and Sen. Henry Cabot Lodge held an emergency meeting with President Taft, and they decided to do a political end-around by coming out for an income tax, but it had to be a Constitutional Amendment. Their bet was that ¾ of the states would never go along.
Long story short, they bet wrong! The slogan of “soak the rich” got politicians in Washington and in the several states, salivating like Pavlov’s dogs. The Senate approved the 16th Amendment 77-0. State after state ratified the amendment and it went into effect on February 12, 1913.
SO HERE’S MY QUESTION: HOW’S THAT “SOAK THE RICH” WORKING OUT FOR YOU?
OK, so much for the history lesson. The scene shifts to the mid nineteen-nineties where
3 Houston business men are talking taxes at lunch one day. One of them threw out a simple question. If the income tax were gone tomorrow, what would the best replacement look like? These guys had some pretty serious pocket change, so they pooled several million dollars to do the research to answer that hypothetical question. (did I mention this was Texas?)
Out of that research was born the FairTax, a national sales tax. It stops penalizing productivity, encourages savings and investment, repatriates trillions of dollars hiding from taxes overseas, and levels the playing field for our exports. When you earn a dollar, you get to keep a dollar. It would jump start our flagging economy like no other stimulus, real or imagined. The IRS has more than 67,000 pages of rules and regulations. By contrast, the FairTax bill, currently before the House Ways and Means Committee, consists of only 132 pages. –A beautiful example of the KISS principle. Simple, transparent, fair and doable. hat’s the FairTax.