The Power to Destroy
Fifty years ago, a remarkable libertarian, personal friend, witty Georgite, then editor of Human Events, came out with a landmark book, The Income Tax: Root of All Evil (text and PDF). Its author was Frank Chodorov who saw raging about him—what’s new?—interventionism, welfarism, political mischief and corruption galore, an ongoing mangling of the limited government model of the Founding Fathers. Hence the "all evil" in his subtitle, which he described to me privately as "the rape of society."
But what was new, then and now, goes beyond many a neocon’s plea today for a renewed Taxpayer’s Bill of Rights or a flat-rate income tax. Instead, Chodorov called for radical surgery: outright repeal of the Sixteenth (Income Tax) Amendment of 1913. Then Uncle Sam was suddenly armed with a tax supercannon, one financing the federal takeover of America, one sinking states' rights mainly via "grants-in-aid" (read payola) to states and localities (further sunk by the Seventeenth Amendment, also of 1913—this amendment requiring popular election of U.S. senators formerly appointed by the state legislatures).
The Chodorov call for repeal of the Sixteenth Amendment was seconded by J. Bracken Lee, governor of Utah, who introduced the book and noted how the states were losing "more and more of their autonomy," how the federal income tax empowered Washington "to bribe the state governments, as well as its citizens, into submission to its will." Submission then and now, if now much more so.
For here in fiscal 2004, which began last October 1st, that bribery comes to a pretty penny. Commerce Department data show that transfer payments to citizens (in such forms as Social Security and Medicare) in the 3rd quarter of calendar 2003 came to $1000.4 billion, annualized, while transfers via "grants-in-aid" to states and localities amounted to $341.6 billion. Add to those totals, $51.9 billion for subsidies to farmers and others and you find that Uncle Sam is spending more than three-fifths of the federal budget, then at $2.2 trillion, in welfare "transfers"—or in "legal plunder," as Frederic Bastiat more honestly put it in his book, The Law, in 1848.
So does this Everest of taxpayer money talk, if not shout, to 200 million adult Americans, many of them bunched into special interests, as Uncle Sam cleverly seizes their money with one hand and then bribes them with it in the other, as he saps further and further the incentives to work and produce, save and invest, while politically sapping further and further the very republic that Founding Father Benjamin Franklin cited when asked outside Independence Hall in 1787 what kind of government the Founders were providing. His famous hedged answer: "A republic, if you can keep it."
How presient was Franklin with his iffy hedge. As Chodorov wrote: "Thus, the immunities of property, body, and mind have been undermined by the Sixteenth Amendment. The freedoms won by Americans in 1776 were lost in the revolution of 1913." For originally, as Chodorov reminds us, the Founders, smelling a rat, had wisely foreclosed an income tax in the Constitution where they stipulated in Article 1, Section 9:
"No capitation, or other Direct Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be undertaken."
To be sure, the Lincoln regime most arbitrarily declared its Civil War income tax to be but an "excise" tax. But that pretense is no longer necessary in view of the sweeping language of the Sixteenth Amendment in force today:
"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."
Sweeping indeed. Chodorov held the absolute right of property, the very heart of a free society, was violated, that income and inheritance taxes imply loss of the integrity if not the very denial of private property, and so they differ radically in impact from all other taxes. The ability-to-pay doctrine, for example, breaks with the equality-before-the-law principle; it spells class warfare between the so-called "rich" and "poor." Yet, as Ludwig Mises notes in Human Action, the rich capitalist or entrepreneur is broadly the poor's best friend as he boosts capital formation.
No wonder, noted Chodorov, that Marx and Engels in their Communist Manifesto of 1848 urged on capitalistic countries like America "despotic inroads on the rights of property." So the Manifesto pushed a heavily progressive income tax as one of ten key ways to undermine the market order and advance the march toward socialism.
After all, capitalism swings almost entirely on the sanctity of private property rights so that capital creation and a market system of free entrepreneurship and market supply and demand can work its wonders of economic growth and higher living standards for society. On the question of human rights over property rights, Chodorov sagely held it was a false dichotomy, that at base human rights are private property rights, led by an individual’s innate human right to self-ownership. At last, such Chodorov wisdom is available again online in both text and PDF.
A monster tax and spending state? And how. Sheldon Richman, in his successor volume to Chodorov, eyes the IRS and you the taxpayer closely and asks: Who’s the master? Who’s the servant? To be sure, the taxpayer is under the protection of the Fourth and Fifth Amendments prohibiting unreasonable searches and seizures, and forced self-incrimination. But IRS Form 1040, assorted schedules, and submitted supporting evidence, such as cancelled checks and monthly credit card company lists of charges, has its limitations: The IRS, backed by the courts, is empowered to demand further corroboration and documentation. As it does, especially via a personal one-on-one audit. So, as Mr. Richman reminds us, the IRS arsenal of weapons is "awesome."
Chief Justice John Marshall thus had quite a point when he held that "the power to tax involves the power to destroy" in McCulloch v. Maryland in 1819. Vast political and economic destruction has ensued since 1913, as Frank Chodorov and Sheldon Richman attest. Both come up with a lasting—and perhaps the only—fiscal solution: Repeal the Sixteenth Amendment.
Mr. Peterson is an adjunct scholar at the Mises Institute and a contributing editor to The Freeman. See his article archive and send him mail. Comment on this article on the blog. See also the The Frederick L. Maier Archive Archive on Taxation.
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.