In 1913, the 16th Amendment to the Constitution, which gave the government the authority to tax people’s income (up to 100% of it), was sold to the public as only taxing the rich. Sound familiar?
By 1913, 36 States had ratified the 16th Amendment to the Constitution. In October, Congress passed a new income tax law with rates beginning at 1 percent and rising to 7 percent for taxpayers with income in excess of $500,000. Less than 1 percent of the population paid income tax at the time.
There is a growing number of Americans who pay zero federal income tax after taking advantage of deductions and credits. This, a result of morphing the income tax system into spending programs. Prior to The Taxpayer Relief Act of 1997, tax relief was generally given in the form of lower tax rates or increased deductions or exemptions. The 1997 Act really launched the modern proliferation of individual tax credits and refundable credits that are in essence spending programs operating through the tax system. This 43.4 million number is as of 2006. No doubt that number is higher now due to record unemployment and more wealth-spreading going on.
Large Number of Non-Payers Make Tax Reform Difficult
Federal tax reform requires that the base of the federal income tax be widened, so that overall tax rates can be reduced. However, because of the large number of Americans currently paying zero federal income tax, any attempt to broaden the tax base will be a difficult sell for lawmakers. The millions of Americans who have no federal income tax liability will either be indifferent about tax reform or will positively oppose it, as it would require bringing them into the federal tax base.
When more people don’t pay taxes than pay taxes under the current system, why would anyone think that these non-payers would vote for anyone who would make them pay? Similar problems are bankrupting European countries over benefits. Any reforms there means taking benefits away.
These findings raise serious questions about the future of the U.S. income tax system, and the possibility of base-broadening tax reform when the majority of the federal tax burden is borne by a shrinking pool of taxpayers. As Congress considers tax reform proposals during the coming year, this is an issue lawmakers should begin to debate.
I got your base-broadening tax reform right here. It’s called the FairTax Act of 2009. It broadens the tax base from 136 million people to every living human being within the borders of the United States. Under the FairTax, the tax base includes our population of 320 million, plus foreign tourists, diplomats, and illegal aliens. You can’t get a broader tax base nor a better stimulus for job creation, economic growth, personal economic security, national economic security, and general economic growth overall.
In the beginning there was a void. The void moveth to Washington whereupon it surroundeth itself with a sphincter muscle.