Is the Income Tax Unconstitutional?
Wishful thinking, always a temptation, is hazardous. Example: An awful lot of people think the income tax as it applies to private-sector wage earners is illegal—even unconstitutional—and they assume that if they can only come up with the right legal arguments, judges will strike down the tax and make America a free society once more. Some of those people are in prison today.
It would be nice if their wish came true. But it’s not going to happen, for reasons I will discuss here. This is another example of Richman’s Maxim: There’s no shortcut to a free society. Since there will be no magic bullet, we will have to advance freedom the old-fashioned FEE way, by becoming as knowledgeable and articulate in our advocacy as possible in order to attract those who hunger to understand freedom. Nothing less will do.
So what about the income tax? There is no shortage of arguments that the income tax is illegal, even unconstitutional. It’s been said to violate the Fifth Amendment guarantee against self-incrimination, that it’s really voluntary, that Federal Reserve Notes aren’t money, and on and on. Most curious is the argument that the income-tax law was never intended to tax wages and salaries earned in the private sector because the lawmakers knew such a tax would be unconstitutional. There are several variations on this theme, and here I can discuss only the broad issues. (Admittedly this leaves me open to the charge that I have not addressed a particular variation. But they all suffer from a similar flaw.)
Let there be no misunderstanding over what I am about to say: The income tax is immoral on many levels. It permits the government nearly unlimited access to the people’s wealth. It opens the door to inquisitorial intrusion into their private affairs. And it introduces such complexity into the law that everyone is a potential criminal.
Three strikes—why isn’t it out?
Alas, something can be immoral and yet legal and constitutional. That’s the fix we’re in.
Some people argue that the Sixteenth Amendment to the Constitution is unconstitutional. But the Constitution sets up a virtually open-ended, if onerous, amendment process. The framers excluded only three subjects from amendment (the importation of slaves and apportionment of direct taxes, which expired in 1808, and equal state representation in the Senate). An amendment to the Constitution therefore cannot logically be unconstitutional. (An unrelated argument is that the Amendment was not properly ratified by the states. Needless to say, the courts established by the Constitution disagree.)
Some legal critics of the tax accept the Amendment, but argue that it is misunderstood and therefore the 1913 income-tax law has been wrongly applied to private-sector wages and salaries. But the misunderstanding is in the people who make this argument. Let’s get straight why the Amendment was proposed. It is widely believed that the U.S. Supreme Court in 1895 declared income taxation in itself unconstitutional, making the Amendment necessary if the feds were to grab part of our paychecks. This is wrong. The Supreme Court’s 1895 Pollock ruling did not strike down the principle of income taxation. All it did was declare taxation of income from real and personal property unconstitutional when it is not apportioned among the states. Taxing wages and salaries was fine as far as the Court was concerned. The only reason it struck down the entire law was that the justices assumed that Congress did not intend that only wages and salaries be taxed.
To understand the Court’s reasoning we have to take up the distinction between direct and indirect taxation. The Constitution requires that direct taxes be apportioned according to the populations of the states, while indirect taxes must be uniform throughout the states. This seems straightforward, until you appreciate that the framers had no clear idea what’s a direct tax and what’s an indirect tax. Such heavyweights as James Madison, Alexander Hamilton, and Fisher Ames couldn’t agree. In America income taxation has long been regarded as indirect, a kind of excise. But in England it has always been regarded as direct.
The Court in 1895 confirmed that income taxation usually is indirect and therefore does not require apportionment, only uniformity. But it found an exception. Taxing income from real and personal property, the Court said (dubiously), is like taxing the property itself, and so, in effect, is direct taxation—thus requiring apportionment. Since the law passed by Congress in 1894 did not contain an apportionment clause, that part was held unconstitutional, and so the whole thing fell.
The Sixteenth Amendment had one purpose: to eliminate the apportionment rule when the source of the income being taxed turns what looks like an indirect tax into a direct tax. That’s why the Amendment says: “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.” (Emphasis added.)
Ever since, the courts have emphasized that the Amendment gave the federal government no new power to tax. All it did was remove from consideration the source of income being taxed and thereby eliminate a restriction on Congress’s taxing power.
The income-tax law passed in 1913 under the newly ratified Amendment was upheld by the Supreme Court in 1916 in the Brushaber case. Here the Court embraced the broadest possible interpretation of the federal taxing power—a power that, the Court said, predates the Sixteenth Amendment. The Court said: “That the authority conferred upon Congress by 8 of article 1 ‘to lay and collect taxes, duties, imposts and excises’ is exhaustive and embraces every conceivable power of taxation has never been questioned. . . . And it has also never been questioned from the foundation . . . that there was authority given, as the part was included in the whole, to lay and collect income taxes. . . .” The Court went on to acknowledge: “the conceded complete and all-embracing taxing power”; “the complete and perfect delegation of the power to tax”; “the complete and all-embracing authority to tax”; and “the plenary power [to tax].” That was just in one paragraph. Later in the opinion we find this: “[T]he all-embracing taxing authority possessed by Congress, including necessarily therein the power to impose income taxes. . . .”
In the succeeding 90 years, no Supreme Court has contradicted the holding in Brushaber.
Facing the Facts
Where does this leave liberty’s advocates? First, we have to face the facts. Like it or not, the U.S. Constitution empowers the Congress to levy any tax it wants. Anyone is free to come up with a contrary interpretation, but the constitutionally endowed courts have spoken. Reading one’s libertarian values into the Constitution is futile. For better or worse, the Constitution means what the occupants of the relevant constitutional offices say it means. The battle over the taxing power occurred long ago—in 1787 between the Federalists and Antifederalists, before the Constitution was ratified. Under the Articles of Confederation, Congress had no power to tax; it could only ask the states to raise money. When the Constitutional Convention proposed to give the central government that fearsome power, the Antifederalists objected, predicting that terrible things would issue from such power. As one Antifederalist warned, “By virtue of their power of taxation, Congress may command the whole, or any part of the property of the people.” Alas, the Antifederalists lost. We will get nowhere if we pretend that this history does not exist.
Confiscatory taxation (but I repeat myself) will never be abolished through arguments that are too clever by half. When the people and their political culture (the real constitution) demand removal of this government burden, it will be removed. Therefore, if freedom is to be won, it will only be through the sort of painstaking educational activities that FEE has engaged in for 60 years.
Comment by Mickey on 29 May 2010:
Article 4 Section 4 states that government within the United States are to be of a Republican form. Meaning all individual rights are to be protected. The right to own and protect property is one of those basic inherent rights. When the government takes our money and gives it to someone else, then that IS NOT a Republic, it is a Democracy. This is why direct taxes are unconstitutional. Research what the founders had to say about Democracies. Our treasonous representatives even proclaim that we are a Democracy. Democracies are self destructive, we are seeing that now.
Comment by Anthony Holt on 18 July 2010:
16th Amendment changed nothing!
Under Article I section 9 of the Constitution it says “No Capitation, or other direct, Tax shall be laid” so how does the income tax get around this? Before you jump an say the 16th Amendment look at what the Supreme Court had to say about the 16TH Amendment.
“The Sixteenth Amendment…..does not extend the taxing power to new or excepted subjects….
Peck & Co. v. Lowe, 247 U.S. 165, at 172 (1918)
What this means is the taxing power congress had before the 16th Amendment remained the same after the 16th Amendment.
1895 the Supreme Court stated that a income tax on wages was Unconstitutional.
So in 1895 it was Unconstitutional to tax wages an the 16th Amendment did not change anything…..so what makes it Constitutional today?
Comment by April on 15 November 2010:
There is nothing more direct than income tax. England has it right. The U.S. is just prevaricating when it claims that income tax is anything but direct. Surely even King John, that infamous taxer, would marvel at our government’s ingenuity in enforcing new powers of taxation.
Income tax discourages those who are industrious from working harder and working more, as their wages just go straight to the government. Income tax is usually removed before a wage earner even gets his pay. Again, it doesn’t get more direct than that.
Comment by tony on 13 January 2011:
the 16th amendment was NOT properly ratified…and occasionally a jury has found this to be the case…however it is tough to get a judge to honestly rule against the source of his paycheck…this website has a lot of nerver calling itself the freemanonline….
Comment by jay on 1 February 2011:
we dont have a demorcacy,republic or any other guvernment…
we ha a oliegarchy system. study oliegarchy and you will find the usa.
Comment by Mark on 14 March 2011:
Jay, for the love of God, please learn how to spell….
Comment by Rosco1776 on 14 March 2011:
I wonder why it was passed on Christmas eve knowing most would be away on holiday, oh yeah, because they knew it would be voted down otherwise.
Repeal the 16th amendment and return to sound money!!
Comment by awoor667 on 4 May 2011:
@Rosco1776: It wasn’t passed on Christmas Eve. It was passed on July 2, 1909 and ratified on February 13, 1913. While I agree that the time that passed between passage and ratification indicate some level of disagreement over the amendment, the fact is, it was neither passed nor ratified on or near Christmas, Easter, Thanksgiving, or anything else. Unless you consider a preoccupation with Independence Day or St. Valentine’s Day to be the reason it passed, your argument fails.
Comment by awoor667 on 4 May 2011:
@Rosco1776: It wasn’t passed on Christmas Eve. It was passed on July 2, 1909 and ratified on February 13, 1913. While I would submit to the argument that the time that passed between passage and ratification indicate some level of disagreement over the amendment, the fact is, it was neither passed nor ratified on or near Christmas, Easter, Thanksgiving, or anything else. Unless you consider a preoccupation with Independence Day or St. Valentine’s Day to be the reason it passed, your argument fails.
Comment by awoor667 on 4 May 2011:
@Rosco1776: It wasn’t passed on Christmas Eve. It was passed on July 2, 1909 and ratified on February 13, 1913. While I would submit to the argument that the time that passed between passage and ratification is indicative of some level of disagreement over the amendment, the fact is, it was neither passed nor ratified on or near Christmas, Easter, Thanksgiving, or anything else. Unless you consider a preoccupation with Independence Day or St. Valentine’s Day to be the reason it passed, your argument fails.
Comment by Context Matters on 29 May 2011:
Re: Anthony Holt
If you actually read the decision that you cite (Peck & Co. v. Lowe) it affirms Congress’s general income taxation power. The reference to “new or excepted subjects” is a reference to certain exports that couldn’t be taxed for various reasons. But, a full quote from the holding of the case validates a general income tax:
“The tax in question is unlike any of those heretofore condemned . . . On the contrary, it is an income tax laid generally on net incomes. And while it cannot be applied to any income which Congress has no power to tax (see Stanton v. Baltic Mining Co., supra, 240 U. S. p. 113, 36 Sup. Ct. 278, 60 L. Ed. 546), it is both nominally and actually a general tax. It is not laid on income from exportation because of its source, or in a discriminative way, but just as it is laid on other income. . . . If articles manufactured and intended for export are subject to taxation under general laws up to the time they are put in course of exportation, as we have seen they are, the conclusion is unavoidable that the net income from the venture when completed, that is to say, after the exportation and sale are fully consummated, is likewise subject to taxation under general laws.
For these reasons we hold that the objection urged against the tax is not well grounded.”
Comment by Mihmz on 30 May 2011:
You know what I just stumbled onto this site
The author of this is using trickery and terminology that could not be understood by over 50 percent of the population
this tells me he does not speak for us , that he is speaking down to us.
Comment by Mihmz on 30 May 2011:
after rereading it it seems like some kind of brainwash he is pushing , from this article alone I do not trust this site already,
If you cannot use common well understood language then you cant be trusted
Comment by Even If There Was A Fire on 30 May 2011:
@Mihmz – This article was well written and there was nothing that can be seen as misleading or “brain washing”. Your comment “If you cannot use common well understood language then you cant be trusted” is ignorant. You assume that anything over your comprehension level is a threat. That’s not the author brain washing you, that’s your lack of education. Your fault, not his. This country has been dumbed down enough as it is, we don’t need it to go any further just because you don’t understand big words.
Comment by GG on 22 July 2011:
Isn’t it the real argument that the taxes paid on income don’t go to the government, but instead it goes to pay the interest accumulated on the money borrowed from the federal reserve?
Comment by Christopher Muir on 27 July 2011:
Mihmz, have you never gone to the doctor, and taken the prescription he’s written for your ailment? The study of basic human anatomy, much less pharmacology, requires an ability to analyze and use language far beyond anything said on this site. Article 1, Section 8 is pretty clear on this matter (though parts of the Constitution don’t read so easily). But your fear of conceptual complexity is common, if not entirely warranted. If an idea or the language used to express that idea seems scary, ask what possible motivations led the author to use such language. In this case, the author has done a remarkable job of hiding his true motivations if you think he’s simply an apologist for the I.R.S. In truth, the ideas behind direct and indirect taxation, the source of much of the confusion regarding the legitimacy or illegitimacy of the U.S. Government’s ability to tax incomes, was fuzzy when the Framers went about writing up the Constitution. It remains fuzzy for a few of the above posters, apparently. Sometimes, only complicated ideas and abstruse wording can properly define the issue at hand… .
Comment by MickeyG on 23 August 2011:
All this taxation is killing the host. The only redeeming qualities of fiat money and a democracy is, the all eventually die.
Comment by tbrew on 11 February 2012:
One of the founders said basically that you can’t tax a person on their labor. The money one earns from the expenditure of their own energy or life force isn’t what I would define as “income”- I should rather think that it would be understood as “compensation”. It’s too democratic and unfair for the people and the behemoth of big government to ride on the coat-tails of the industrious.
Comment by tbrew on 11 February 2012:
I think a consumption tax is a far better way to go.
Comment by ClarcKing on 7 May 2012:
There is so much sophistry in the income tax law and its application as to make it unenforceable. I am perplexed at this late date, this modern and sophisticated era, within the highest educated population in the world, that there isn’t a satisfactory explanation of the 16th Amendment and its intentions.
It appears to me that a direct tax on the average citizen’s wages, labor, production, etc. is unconstitutional as the 16th Amendment ratification did not operate a direct tax on the wages of the citizenry. The direct tax on wages came when FDR enacted a “victory tax” that never went away. Sophistry and specious arguments ensued, today we can only observe an obvious economic and population contraction policy.
The 16th Amendment could operate a transaction tax on the stock market trade; wiping out any government deficits. The operation and application of the income tax is meant to oppress. The conjugation of high tax liabilities and high tax write-offs created the recent Wall St./Fed engineered boom and bust.
Courts and the law profession generally, have served the oligarchical, unconstitutional Federal Reserve of the monetary financial, debt based system, a British Imperial construct in itself. The pretense of any legitimacy here must be confronted, as it has operated treason, a subversion of the perfect American credit based, physical economy, political system; the Fed is the basis of our national economy collapse.
Then there is the term income; abused, as if everything under the Sun can be termed income and therefore taxable. Lastly the term source in the 16th Amendment is too generalized in the public’s vernacular and once again abused, not specific enough for legal description. No member of the US citizenry can be a taxable source, it’s not possible.
I’d appreciate your thoughts, additions, and/or corrections, etc.