The 16th Amendment has provided the funding for all of the programs that are bankrupting this country. The 16th Amendment which was ratified in 1916 simply states:
“The Congress shall have the power to lay and collect taxes on incomes, from whatever sources derived, without apportionment among the several States and without regard to any census or enumeration.”
Prior to 1916 the Congress was limited in its ability to tax by Article I, Section 8, Clause 1 which states:
“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.”
In effect, this provision forbade the collection of income taxes because they would not be “uniform” throughout the states. That is, the wealthier states would pay more taxes than poorer states.
In 1913 Congress passed the 16th Amendment authorizing the Federal Government to impose income taxes on individuals and corporations. Voters were led to believe that the income tax would only be implemented in emergencies and it would only be applied to the rich. Shortly after the 16th Amendment was ratified President Wilson signed the Revenue Act of 1913. It provided for a $3,000 exemption for single persons and a $4,000 exemption for married persons. All income below $20,000 was taxed at 1% and all income above $500,000 was taxed at 7%.
Then, in 1916, the lowest tax rate was doubled to 2% and the top rate was more than doubled to 15%. Then from 1918 to 1921 the bottom rate was raised to 6% while the top rate rose to 77%. Under the Secretary of the Treasury Andrew Mellon, in response to the recession that occurred after WWI, the rates were gradually lowered from 1922 to 1931 to 1.5% to 25%. This decrease in tax rates generated more tax revenue for the government while encouraging businesses to invest and expand. This, along with the expanded money supply, resulted in the roaring 20s where virtually everyone prospered.
However, in 1932 under FDR the tax rates were again raised from 1.5% to 4% and 25% to 63% and continued to rise until they reached 23% and 94% in 1944. The top rates gradually declined to 91% in 1955 where they stood until 1964 when President Kennedy reduced the top rate to 77% and then from 1965 to 1976 the top rate remained at 70%.
In 1982 under President Regan the top rates were reduced to 50% and in 1988 they were further reduced to 25%. They were then raised again under President Clinton to 31% and then to 39.6% in 1994. Today, the lowest tax rate is 10% while the top rate is 35%. However, these rates are scheduled to increase in 2013 which will undoubtedly occur now that President Obama was re-elected.
The government needs revenues in order to function and provide services such as national defense. However, when there is no constitutional limit on the tax rates or total tax collections, the Federal Government is free to levy any tax on any income that they choose. This, along with the ability to borrow and print money, has allowed the Federal Government the ability to fund current spending in the amount of $50,000 per household per year!
Under our current tax system, income is taxed when it is earned. When the income is spent it is then taxed through sales taxes. If it is invested in real estate, it is forever taxed through real estate taxes. If the after tax income is invested the income generated is then taxed again. After all of these taxes are levied, if the taxpayer manages to accumulate a substantial net worth, then it is taxed again when they die through the estate (i.e. death) tax. This is certainly not what the founding fathers envisioned.
The Federal Income Tax Code has now become so complicated that even the IRS doesn’t understand it. The IRS code now consists of 20 volumes totaling 13,458 pages. According to CCH, the Title 26 language along with the explanations of the tax laws has grown from 400 pages in 1913 to 73,600 pages in 2012. This is in addition to the countless tax court cases which affect the interpretation of the tax code. If there were no other reason to secede our tax system would be sufficient!