Sunday, November 11, 2007

Why do you pay taxes?

I was discussing the National Debt with some people the other day and it came up that I support Ron Paul for President. I was asked how I could support him when he wants to do away with the IRS. They said our country would collapse without income taxes to fund our government. It is amazing how misinformed people are these days if they truly believe that?

As originally ratified, the Constitution of the United States, mentions taxation three times, and all references to it are found in Article 1.

Section 1, "Representatives and direct taxes shall be apportioned among the several states..."

Section 8, "The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States"

Section 9 "No capitation, or other direct tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

Even I had to study some to figure out exactly what some of the terms used in those clauses meant. Therefore I cannot fault people for not completely understanding them either. However, once I learned what they meant I became convinced that a tax upon a persons income is unconstitutional.

In section 1 it states that direct taxes shall be apportioned among the several states. Apportioned means to be divided equally. According to the U.S. Court of Appeals for the District of Columbia, there are only three taxes that are classified as direct taxes. They are, a capitation, (a direct tax levied upon each person, also known as a head tax), a tax upon real property, and a tax upon personal property. Real property is in regards to buildings and structures that cannot be moved, while personal property covers items that you own that can be moved from location to location.

Section 8 states that the Congress shall have the power to lay and collect taxes, duties, imposts and excises. Taxes come in many forms such as the duties, imposts, and excises listed in the Constitution. A duty is a form of tax that is applied to a specific object which is often seen in regards to customs duties when you bring things from one country to another. According to West's Encyclopedia of American Law, an impost is another form of tax that is most often associated with customs duties. An excise tax is a tax upon consumption. We pay excise taxes upon such items as gasoline, cigarettes and alcohol.

An income tax is a tax levied on the financial income of either persons, corporations or other entities. Yet the term income tax is nowhere to be found in the constitution.

When talking about income taxes, there are progressive, proportional, an regressive methods of taxing income. In the United States we use a progressive, or graudated tax system, in which the more you make, the higher the tax you are required to pay. If you earn under $7825 per year you pay 10%, if you earn under $3150 per year you pay 15%, all the way up to 35% for those who earn $174,850 and up. Corporate tax rates are also progressive, but they vary a bit differently. All the tax rates can be found at,

The history of an income tax goes way back in our nations history. After the War of 1812 an income tax was imposed to help pay off the debt incurred by the war. However, after the debt was paid the tax was repealed.

In 1895 the issue of an income tax was put before the Supreme Court in the case of Pollock v. Farmers Loan & Trust. The Court ruled that income taxes were direct taxes and therefore unconstitutional.

In his dissent to the Pollack decision, Justice Harlan stated:

"When, therefore, this court adjudges, as it does now adjudge, that Congress cannot impose a duty or tax upon personal property, or upon income arising either from rents of real estate or from personal property, including invested personal property, bonds, stocks, and investments of all kinds, except by apportioning the sum to be so raised among the States according to population, it practically decides that, without an amendment of the Constitution -- two-thirds of both Houses of Congress and three-fourths of the States concurring -- such property and incomes can never be made to contribute to the support of the national government."

It became apparent that the Courts would strike down any new taxes upon a persons income as unconstitutional. Therefore the 16th amendment was proposed and ratified, altering the means and ability to tax the people of this country.

The sixteenth amendment states, "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."

Although some claim the ratification process of the 16th amendment was flawed and therefore the amendment was never legally ratified, there still disagreements on what exactly defined income.

The Supreme Court ruled on a few of them, such as in Eisner v. McCumber the Court ruled that income is derived from gains or profits made from activity, but not income derived from labor. In Doyle v. Mitchell the Court ruled, "...the idea of gain or increase arising from corporate activity."

U.S. District Court Judge James C. Cox, in 2003 said, “If you examine the [16th amendment] carefully you would find that a sufficient number of states never ratified that amendment.

State Rep Phil Hart (R-Idaho) states, “ You can look through the statues and look for the law that requires you to pay, and you do that you can’t identify a law that says the average person in America who earns a wage and works in private business has to pay and income tax.

According to Supreme Court in Stanton vs. Baltic Mining, “the provisions of the 16th amendment conferred no new powers of taxation.” Also from the NY Times, January of 1916 “In substance, the court holds that the sixteenth amendment did not empower the federal government to levy a new tax.

There have been numerous petitions by the people of this country, asking the federal government to show them the statute that requires them to pay a tax upon their earnings. The federal government has refused to do so. David Cay Johnston of the NY Times once asked, “Why won’t the IRS answer the question set forth in the petitions of the American people." His answer was, “The government is answering the questions through enforcement in the courts.” In other words, the government is using intimidation and force to keep us in line.

There have been agents of the Internal Revenue Service who have resigned because they could not find the law that states the people of this country are required to pay an income tax. Among them are John Turner, Joe Bannister, and Sherry Jackson, who was recently sent to prison for not paying an income tax.

Strikingly, even our Congress could not find the law that says we have to pay income taxes. In a letter from Daniel K. Inouye, we find the following, “Based on research by the Congressional Research Service, there is no provisions individual to pay an income tax.

I personally feel that the 16th amendment was a crime perpetrated upon the people of this country by our government, done in a method to hide the illegality of it. However since too many are unwilling to accept that proposal, and therefore they continue to pay into the scheme to rob them of their labor, that will not be my purpose in writing this paper. I wish to show you how our tax system is being used to plunder the working people of America while it is being exploited and taken advantage of by corporations. I also want to show how our government, no matter how much they take in from taxes, is still spending more than it receives from tax revenues. So, from this point forward, no matter how distasteful I find it, I am going to proceed under the presumption that we are required to pay taxes upon our earnings.

If we all can agree that taxes are meant to fund our government, then I would like to show provide you with facts that show that this is just not the case.

When Ronald Reagan became president, he set up the Grace Commission to work to route out inefficiency in government. In their report, the Commission stated that,
“100% of what is collected is absorbed solely by the federal debt.”

Each year since 1969, Congress has spent more money than its income. As of this writing our national debt stands at $9.1 trillion dollars. To pay the debt off it would mean that each citizen, every man, woman and child in this country would have to pay $30,034.26. I can tell you right now, that is more than I earn in a year.

According to David Walker, Comptroller General, "Deficit spending and promised benefits for federal entitlement programs have put every man, woman, and child in the United States on the hook for $175,000"

So, if our taxes are only going towards paying interest upon the money our government has borrowed to function, who exactly have they borrowed that money from?

That is a complicated question, even for me, but I will try to simplify it as best I can. According to some, good portion of it is held by the purchasers of T-bonds and savings bonds, while about half the remaining debt is held by the American in the form of insurance companies and retirement funds, and then the rest is held by foreign investors.

According to another source,, 40% is held by the Federal Reserve Bank, 22% by foreign investors and the rest is divided among other sources.

According to, ttp://, 58% of the debt is held by private investors who buy those T-bonds, while 1/3 is held by foreign investors, and only $3.3 trillion is held by the Federal Reserve. It is interesting also that much of the debt is held by IOU's to the Social Security Trust fund, from which our government has been plundering for years to feed its incessant growth and spending.

Regardless of who holds the debt, our country, our government in particular, has dug us into a hole we are not likely to get out of easily. They have allowed the Federal Reserve Bank to just print more money to fund their operation. This has led to inflation and the overall decline in the value of the U.S. dollar as compared to all other world currencies.

After President Woodrow Wilson signed the Federal Reserve Act he is quoted as saying, “I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of debt." Compare that to what Thomas Jefferson said in regards to the banking industry, "If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

As our government continues to spend, and our national debt continues to rise towards $10 trillion, our government continues to borrow from the FED and the dollar continues to decline in value.

Already there are hints that the loss of value of the dollar is causing some foreign investors to sell off their holdings in dollars and switch to something more stable.

While this is happening, we, the taxpayers are being saddled with this debt that we cannot conceivably pay off. Our children, their children, and their grandchildren will be stuck with this monstrous debt.

We are stuck with this debt, we have no choice other than to pay taxes, or go to jail. However, remember in the Supreme Court case of Doyle v. Mitchell the Court ruled, income referred to "...the idea of gain or increase arising from corporate activity".

So, how much of this burden are the corporations in this country carrying? The Tax Policy Center, Urban Institute and Brookings Institute, have put together a list going back to 1934 which compares the amount of money collected in taxes by individuals and corporations.

The numbers are in millions and what this chart shows is very interesting. For example, in 1934, individual income taxes were $420 million and corporate taxes taken in where $364 million. The public paid approximately 14% more in taxes than corporations. Fast forward to 1960 and individual income taxes drew in $40.715 million in revenue while corporations paid $$21.494 million, a 48% difference. Zoom up to 2000 and we, the taxpayers paid $1,004,462 million in taxes while corporations paid $202,289 million, a difference of 80%.

As these statistics show, the American people are getting stuck paying for our government while our corporations have managed to weasel out of paying their share. Cheryl Woodward of found that between 1990-2000 corporate profits rose by 93% and CEO pay went up 517%. Yet median wages went down 3.6%. If corporations are making more then you would think that they in turn would be paying more in taxes, not less as the statistics by the Tax Policy Center state.

Leona Helmsley, the Queen of Mean, once said, "We don't pay taxes...only the little people pay taxes." That is obvious from the figures presented, but how can that be if our tax system is fair?

The answer is simple, our government has structured the tax system in such a way that corporations can find loopholes which allow for them to avoid paying taxes, or at least the required amount of taxes upon their earnings.

According to the Citizens for Tax Justice, 275 of Americans corporations paid only a 17.2% tax rate, less than half of the required 35%.

Fox News claims to be fair and balanced, yet their owner Rupert Murdoch is far from fair when it comes to paying his taxes. According to the BBC and the Economics Newspaper, Murdoch paid a meager 6% taxes upon $5.4 billion in profits.

So, how do our corporations get away with not paying their fair share of taxes? According to Senator Byron Dorgan, in his book Take This Job And Ship It, "The tax code is written in a way that allows companies not to pay the full 35% U.S. corporate tax rate on foreign income when that money remains invested overseas."

You might think that the money does no good if it remains invested overseas. However, that is not the end of the story. In 2005, the Republican controlled Congress passed a special law that lowered the tax rate for corporations who wish to bring their money back to the U.S. to 5.25%.

So, our companies can move overseas and make their products using low paid foreign workers, then sell them to American citizens for a huge profit and pay only 5.25% in taxes. That hardly sounds fair.

David Evens, a reporter for Bloomberg News discovered that there is a 5 story building in the Cayman Islands that is the corporate address for over 12 thousand businesses. These businesses are getting a lower tax rate because they are headquarted overseas.

How does all this happen? It is because our government, for the most part does not care about you or I. They receive corporate funds in the form of campaign contributions. If they change the tax code to make these corporations pay their fair share, the will be biting the hand that feeds them.

Until we as a nation decide that we have had enough of elected representatives who have sold their soul to special interests and globalists, things will never change. We need to get involved, let our government know that their days of frivolous spending are over, the days of hidden earmarks gone, and that they are going to have to live within their means.

I would like you to ponder these two quotes.

"A politician cannot spend one dime on any spending project without first taking that dime from the person who earned it. So, when a politician votes for a spending bill he is saying that he believes the government should spend that particular dollar rather than the individual who worked for it." Neal Boortz.

"There is no such thing as government money - only taxpayer money." William Weld, quoted in Readers Digest.

It is your money that our government has squandered. They have taken it from you in the form of taxes that are questionable at best. They have disregarded the financial and economic future of the working class of America. We are now shouldered with a debt that will be with us for decades. The value of our currency has shrunk, and it will continue to do so as our government continues to just float another loan from the FED to fund its spending. When will it stop? That my friends is entirely up to you.

1 comment:

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