Showing posts with label Income Tax. Show all posts
Showing posts with label Income Tax. Show all posts

Wednesday, February 8, 2012

3 Reasons to Repeal 1913

Topher Morrison
cross-posted at
This Saturday at a stump speech in Rochester, Minnesota Ron Paul may have outdone even himself.  Famous for advocating the repeal of many laws, the elimination of numerous agencies and substantially reducing the size and scope of the federal government Ron Paul recently told the Wall Street Journal “I’d really like to repeal 1913.”  Why a whole year?  Three reasons:

·      On February 3, 1913 the 16th Amendment to the United States Constitution was ratified.  The amendment allows Congress to levy an income tax without apportioning it among the states per the Constitution Article I, Sections 2,8, and 9.

·      On May 31st, 1913 the 17th Amendment was declared part of the Constitution by Secretary of State William Jennings Bryan.  It established the direct election of U.S. Senators by popular vote stripping the right away from the state legislators.

·      On December 23, 1913 the Federal Reserve Act was passed.  This act grants a consortium of private banks legal authority to issue Federal Reserve Notes.

These three events are barely discussed in today’s retail politics, but they are at the genesis of nearly every controversy the country suffers from today.  After 1913, the United States, once a grand laboratory of democratic experiments became irrevocably chained to the one-size-fits-all decisions of experts and special interests in Washington D.C.

The 16th Amendment or the federal income tax created the IRS as we know it today and allows the federal government to pool national wealth and keep it without returning it to the states.  This allows Washington to create massive entitlement programs, go to war, prop up foreign governments, fund extensive bureaucracies and bribe state governments with their own money to accept federal regulation.

The 17th Amendment, while affirming the redemptive qualities of popular sovereignty by instituting direct elections of U.S. Senators, removed the state governments from the federal process.  The bicameral legislature was originally set up to represent both the people (House of Representatives) and the states (Senate) as an indispensible component of federalism and an essential check on government overreach.

Prior to 1913 Senators gave the 10th Amendment teeth by acting as jealous guardians of individual state rights.  Held to account by local legislatures U.S. Senators were charged with preventing unlawful federal encroachment upon those rights.  Any legislation that would emphasize the federal government over of the state governments or their citizens would be voted down.

The Federal Reserve Act also known as the Aldrich Plan effectively privatized what was otherwise a public utility, the nations money supply.  Handing monetary policy over to a fundamental conflict of interest is all that is important here.  The Constitution as originally conceived charged Congress with the public regulation of monetary policy, not private banks.  The Federal Reserve inherently desires our government to spend more and thereby borrow more at interest, whether it be for peace or war.

Few Americans appreciate the fact that while the last century is known as the “American Century” we began it already on top.   By 1906 the United States was the dominant economy in the world, enjoying the highest living standards and literally recreating the world in our image.  It stands to reason therefore that it is what we did (or better yet, did not do) as a country in the 19th century, which led to our prominence in the 20th.

With this in mind it strikes me as odd when someone praises what we “accomplished” during the last century when it in fact these accomplishments testify to where we are now – divided, decadent, laden with debt and in decline.   Nonetheless it has become a buzzword for some to claim the Tea Party movement, conservative leaders and libertarians want to “repeal the 20th century” evidenced here, here, here and in this video:


This byword hides the fact that nearly all of the 20th century’s legislative accomplishments and wars are predicated on the fundamental changes that literally ripped the heart and soul out of the Constitution.  Its a matter of perspective, does one measure accomplishments on what we are able to do through government namely by winning wars or passing laws?  Or does one measure accomplishments on our aggregate ability to progress and add value to each others lives, something government can never do?

These three pieces of legislation over the last 105 years acting in concert have effectively ended capitalism and replaced it with corporatism.  The year of 1913 was crucial in reducing a vibrant republic to one glacial organism monolithic in its agenda, pallid in its imagination, unresponsive to the needs of its people and growing in capacity to harm not only Americans, but others as well.  We must now ask ourselves: shall we like so many other nations succumb and be pulled back into the fog of history or are we to reclaim our culture of freedom and emphasis on the individual and resist the fate of so many nations?

Tuesday, October 11, 2011

GOPs New Love Affair, Herman Cain and VAT Taxes

Topher Morrison
PurpleSerf.com


There is a floating faction in the GOP which can't seem to settle on one candidate.  First into the spotlight was Michelle Bachmann and her Tea Party legitimacy.  Then it was Rick Perry who in classic Texan fashion came out of the gate guns a blazin' only to be holstered just as fast.  Begrudgingly the conservative undecideds have returned to Mitt Romney who wears his experience in Massachusetts like a scarlet letter.  In every case with a challenger to this ostensible nominee their loss of appeal is someone else's gain, Herman Cain is the latest example.  But is Cain destined for a similar fate once the restless side of the GOP takes a closer look at him?


          He is a straight talker.  You feel like you know where he stands and if he doesn't know he'll tell you.  But aside from the esoteric who is Herman Cain?  What would his first 100 days look like?  Well in the words of Herman Cain himself, "Lets Get Real."


UPDATE: American Research Group says Cain is #1 in South Carolina



          No stranger to business (or admittedly to ignorance in world affairs) and evidently adept at communicating his goals, Cain has succinctly articulated his platform; 9-9-9.  He advocates flat taxes of 9% on net business profits, 9% personal income tax allowing only for charitable donation deductions and a 9% national sales tax.  The 9-9-9 plan includes a transitional stage where the "the Fair Tax would ultimately replace individual and corporate income taxes."  Why there is a need for a transition is not clear, however, Cain claims that "amidst a backdrop of the economic boom created by the Phase 1 Enhanced Plan, I will begin the process of educating the American people on the benefits of continuing the next step to the Fair Tax."  Whether America will be ready for the lesson is another question entirely.   


          There are some interesting opinions on this strategy of transition.  Considering Congress' short attention span who's to say that some "crisis" won't arise (they do so often in Washington these days) and stymies any transition from Cain's tripartite taxation system into a true flat and fair tax.  How many crises do you think would arise should the United States carve out not only the IRS, but the galaxy of ancillary organizations from Deloitte & Touche to Turbo Tax?  Who's to say we wouldn't be stuck with the whole shebang?


          The Wall Street Journal calls "Cain's tax mutiny" a "political killer."  They admit the plan is deficit neutral and would bring into government coffers as much as the current tax system, that it would eliminate double taxation on savings and investment, eliminate loopholes that have allowed companies like Google and General Electric to pay next to zero income tax.  Cain's plan admittedly would also reduce the distortions created by compliance (and avoidance), would substantially increase our global competitiveness, and would allow the U.S. economy to tap into a deep worldwide reservoir of foreign direct investment; in other words "if Americans want more jobs, this plan would produce them in a hurry" according to the WSJ.  However, there is a dark side to Herman Cain's plan.


          Americans have been snookered before, according to the WSJ:


          "the current income tax was introduced in 1913 with a top rate of 7% amid promises
           that it would never exceed 10%.  By 1918 the tope rate was 77%."


Because his plan does not first eliminate the 16th Amendment, which created the national income tax, America seduced by the intoxicating prospect of flat and fair taxes and rapid growth will in reality be made vulnerable to newer more demagogic style tax politics akin to those in Europe. 


          "Consumption tax rates usually started at less than 10%, but in much of euroland 'the
           rates have nearly doubled and now are close to 20%,' according to a study by the
           Cato Institute's Dan Mitchell.  Because a sales tax would raise hug sums with small
           increases in the rate, we would see regular campaigns like 'a penny to fight poverty,'
           or 'one-cent for universal health care' that would be politically tough to defeat."


Moreover, Josh Barro of the National Review points out that the 9% business tax needs either some fine tuning or at least clarification as it seems to be in essence a "lightly modified VAT" which doesn't exactly "equalize the treatment of corporate debt and equity."


          If you don't buy that the European track record will apply here, a head Senatorial tax advisor pointed out to PurpleSerf today the abysmal situation in California.  The politically blue state is very much in the red even though it has both sales and state income taxes which exceed corresponding rates in most of the lower 48!  "That is a staggering double whammy!" he continued "...unless the income tax is completely abolished an additional tax system like a VAT is and should be a non-starter."   


          The issue of federal taxation is of growing importance not only when it comes to reducing the debt, simplifying our lives, but who is ultimately being paid and how much control Washington should wield over the country's wealth.  Herman Cain's time with the Federal Reserve of Kansas City has been a concern for many paleo-conservatives, libertarians and constitutionalists.  The group WeAreChange.org recently followed Herman Cain in Iowa (gets interesting at 6:50):


          Evidently Herman Cain is for a sound money system and from this interview apparently one based on gold, which brings him within the orbit of Ron Paul yet there is little publicity on this point.  However, much in the same vein as his 9-9-9 plan there needs to be another transition period from fiat currency to sound money so don't expect him to end the Federal Reserve any time soon.  He offers a compelling reason not to: "the guiding economic principles is... measurements must be dependable" if we were to eliminate the Fed "there would be chaos."  

           He advocates that Congress should start doing its job by vetting Federal Reserve appointees more closely and narrowing their prerogatives.  In response to Thomas Jefferson's words lamenting the prospect of a central bank Mr. Cain claimed we now live in a "global economy and a global financial system."  The exact point at which a private central bank was required for this new world order rather than the democratically elected Congress of the United States he did not elaborate.   

          I wonder if Mr. Cain has thought about how the global system would react to him undercutting their tax rates and reintroducing a gold standard to a world based on fiat.  Talk about chaos!  For all the transitions Herman Cain advocates one has to wonder when or will the rubber ever meet the road.  With no public record to point to, lets get real, it's anyones guess.