In 1913, the 16th Amendment – the income tax amendment – was added to the U.S. Constitution. It was a watershed event in American history, for it fundamentally transformed the relationship between the American people and the federal government.
For approximately 125 years, the American people had lived without a federal income tax. Individuals were free to earn unlimited amounts of wealth, and there was nothing that Congress and the president could do about it. The Constitution had not granted the federal government the power to levy a tax on incomes.
Why didn’t our Founding Fathers grant the government such a power in the first place? The answer is found in the Declaration of Independence. Thomas Jefferson emphasized that all men have certain fundamental rights with which no government can legitimately interfere. Among those rights are life, liberty, and the pursuit of happiness.
What was truly revolutionary about the Declaration is the notion that the exercise of such rights is actually immune from the control of government, even if the government is democratically elected. For example, even if 97 percent of the American people demanded a law requiring everyone to attend church on Sunday, their duly elected congressmen would not have the power to enact such a law. Whether to worship or not is immune from majority rule.
The reason that the Founders did not grant the federal government the power to levy an income tax is that they believed that a person’s income – that is, the property he acquires through labor and exchange – is itself immune from majority vote. That is, they believed that an essential aspect of life, liberty, and the pursuit of happiness is the right of each person to acquire wealth and property and then decide what to do with it.
What was central to the thinking of the Founders was the notion that the individual, not the government, is sovereign and supreme over his own life and his own income and savings. Government officials were viewed merely as servants, their primary duty being to ensure that violent people did not interfere with the exercise of fundamental rights, e.g., the unlimited accumulation of wealth.
The 16th Amendment inverted this relationship between the American people and their national government. By nationalizing income, the amendment caused the federal government to become sovereign and supreme and the citizens to assume the role of servants.
Nationalizing income? Yes, that’s exactly what the 16th Amendment did. Today, the federal government owns everyone’s income and, by setting the percentage of tax to be paid, in effect provides each citizen with an allowance. Sometimes they are good to us and permit us to keep more of our money. Sometimes they are not so good and permit us to keep less. But what matters is not the exact percentage of income tax but rather the fact that government officials have the power to set the percentage.
Assume that I am your pharaoh and, as such, have the power to force you to work for me seven days a week. I decide to be nice to you and force you to work for me only one day a week. Does my benevolence change the nature of our relationship? Of course not. You remain my slave even though you are working six days a week for yourself, because I’m the one giving you permission to do so. If I’m the one setting the percentage of time you must devote to me, I am the master and you are the servant.
A much more honest and direct approach – one that would truly reflect what the 16th Amendment has done to the American people – would be to impose a 100 percent withholding tax on everyone, enabling all income to flow directly to Washington; each citizen would later be sent a U.S. Treasury check as his governmental allowance. At least then, the American people would be able to see clearly how the passage of the 16th Amendment fundamentally changed their relationship to their government.
Should Congress give us a 10 percent income tax cut and IRS reform? Shouldn’t we be asking a more fundamental question: Why not recapture the principles of liberty on which America was founded by simply abolishing the income tax and the IRS through the repeal of the 16th Amendment?