By Steven D. Miller
THE U.S. CONSTITUTION REQUIRES A BUDGET SHORTFALL TO BE PAID BY DIRECT TAXATION
The ongoing normal, everyday costs of government are to be met by ongoing indirect taxes of Imposts, Duties, and Excises (Article 1, Section 8), But, to keep the budget balanced to meet emergency costs, Congress is to resort to the other method of taxation: Congress is to tax the states by sending an apportioned tax bill to the governors. Article 1, section 2, clause 3 is a direct tax which was intended for emergencies ONLY. You can read about this in the Federalist Papers Nos. 10, 21, 35, 36 and 51 — and in the debates of the 1787 constitutional convention on July 12 and 13. — and in the ratification documents submitted by Rhode Island, New Hampshire, New York, Virginia, South Carolina, Massachusetts, and North Carolina. It was used, as emergency taxation, to extinguish a part of the Revolutionary War debt, it was used during the War of 1812, and it was used by the Union to meet deficiencies during the Civil War. Direct tax was never intended as an everyday tax to meet ongoing expenses. *
Thomas Jefferson boasted of his achievement in eliminating direct taxes.
The remaining revenue on the consumption of foreign articles, is paid cheerfully by those who can afford to add foreign luxuries to domestic comforts, being collected on our seaboards and frontiers only, and incorporated with the transactions of our mercantile citizens, it may be the pleasure and pride of an American to ask, what farmer, what mechanic, what laborer, ever sees a tax-gatherer of the United States? These contributions enable us to support the current expenses of the government, to fulfill contracts with foreign nations, to extinguish the native right of soil within our limits, to extend those limits, and to apply such a surplus to our public debts, as places at a short day their final redemption, and that redemption once effected, the revenue thereby liberated may, by a just repartition among the states, and a corresponding amendment of the constitution, be applied, in time of peace, to rivers, canals, roads, arts, manufactures, education, and other great objects within each state. In time of war, if injustice, by ourselves or others, must sometimes produce war, increased as the same revenue will be increased by population and consumption, and aided by other resources reserved for that crisis, it may meet within the year all the expenses of the year, without encroaching on the rights of future generations, by burdening them with the debts of the past. War will then be but a suspension of useful works, and a return to a state of peace, a return to the progress of improvement.” — Thomas Jefferson’s Second Inaugural Address of March 4, 1805
The budget must be balanced — the deficit paid — by the end of the year that the expenditures were made.
As an individual who undertakes to live by borrowing, soon finds his original means devoured by interest, and next no one left to borrow from, so must it be with a government.”
Abraham Lincoln — campaign circular from Whig Committee, March 4, 1843
Article 1, section 2, clause 3 requires states to pay these emergency direct taxes, NOT people. This is a check-and-balance that was put into the Constitution to make overspending VERY painful to politicians. Constituents would be outraged at their representatives overspending. State political machinery would not tolerate federal depleting of the state treasury. Federal Tax collectors could NOT harass the people, it must deal with the state political machinery. And congressmen would be asked to answer to us why they overspend on our behalf. If the constitution were enforced, it would — via strong political pressure to recall congressmen — require a balanced budget, force congress to limit their spending to constitutional matters, and provide congress with strong political incentives to represent the true interests of their constituents. The federal government would be forced to remain subservient to the citizen creators of government. Which, after all, is the reason why “we the people” authorized government to exist.
*And NO, the 16th amendment did not change this, for many reasons.
(1) The US Supreme Court in Stanton v. Baltic Mining Co., 240 US 103 (1915) determined that “… the 16th amendment conferred no new powers of taxation.“
(2) No one who had a duty to uphold the constitution could propose to change it, which is why Article 5 only allows “amendments to” but never an “amendment of” the constitution*.
(3) the original proposed 16th amendment in Senate Joint Resolution 39 as published in Congressional Record June 11, 1909 page 3377.”The Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several states according to population”
The Senate Finance Committee then revised it as Senate Joint Resolution 40, to what we have today. (published on Page 3900 of the Congressional Record of June 28, 1909)
The word “direct” was removed from the original proposed amendment.
The words “from whatever source derived” were added.
I repeat: the word “direct” was removed from the proposed 16th Amendment before any State ratified it. NO STATE EVER RATIFIED THE 16TH AMENDMENT TO AUTHORIZE UNAPPORTIONED DIRECT TAXES ON PEOPLE. On August 2, 1909, Alabama was the first state to ratify the 16th Amendment after it was revised with the word “Direct” removed. See NY Times front page article here. It was promoted as a tax on the wealthy — it would only tax bank interest of the wealthy. Bank interest is a government granted privilege, never a right. See my essay on Usury.
No one can ever claim that the 16th Amendment authorizes an unapportioned direct tax on anyone’s wages (except government employee’s wages). The words “from whatever source derived” means what it has always meant. After a judgment, they can collect what is owed by garnishing wages, seizing assets and bank accounts, or collecting from creditors from whatever source derived, not just the revenue-taxable activity that created the tax liability.
Nothing was changed by the 16th Amendment. The Supreme Court confirmed that there is no new taxing authority. The amendment DID NOT eliminate apportionment, nor convert direct taxes into indirect taxes. Since the word direct was deleted, it can never be argued that it authorized a direct tax that is unapportioned among the States.
There is not now, nor can there ever be an unapportioned direct tax on incomes. (except for federal employees who are already subject to federal jurisdiction — and who’s wages were taxed since 1862 — long before the 16th Amendment).
(4) Senate ratification debates in the Congressional Record, August 28 1913 insisted that the word “income” referred only to earnings on savings accounts. See my essay on Constitutional Taxation. (Note that interest on bank savings accounts is a government granted privilege that can be taxed. )
By the way, the Article 1 section 8 power to borrow money was intended to be short term debt to be repaid when the states remit their payments. This was never intended to grant the power to issue debt currency. It remains unconstitutional to “emit Bills of Credit” per Article 1 section 10.
33 FACTS ABOUT THE NATIONAL DEBT
* Article 5 allows Amendment TO, but never an Amendment OF the Constitution. No one can swear an oath to uphold and defend something then commit treason by trying to change it.
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