I have been thinking a lot recently on the issues of government spending, taxation, and economic growth, especially since Tax Day was just here. For most Americans these are topics that come up in daily conversation, but how many of us really bother to look into these subjects in greater depth to really understand them? This is why I decided to write a few articles on these issues to shed some light on the issues that we need to have a better understanding of if we are to call ourselves “True Americans”.
The Federal Personal Income Tax
It is a shame that very few Americans today know how we even became a country; that the biggest reason we fought for freedom from England was taxes! Today the government takes a good portion of our income from us before we even get the chance to see it. In America today we are taught that having a personal income tax on work we do is the way it has always been. We are also taught that we must pay this tax so that the government can “take care” of us, and if we didn’t pay a federal income tax our country would be wiped out overnight. Well, lets take a look at the real history. When America first became a country the federal revenue was raised by two methods 1) tariffs and 2) luxury items, corporate bonds, and slaves. By 1817 the federal government did the unthinkable, they actually did away with ALL internal taxes and the only source of revenue was by tariffs on imported goods. This lasted until the Civil War and from 1862-1872 we had a personal income tax of 3%. So for the first 85 years our country was prospering we had no personal income tax, and 45 of those years we didn’t have an federal internal taxes. Now for the part you almost will never hear in school or read I in a textbook. In 1894-95 the federal personal income tax again surfaced. This time in 1895 the U.S. Supreme Court actual declared the personal income tax unconstitutional because it was not allowed by the Constitution. It was not until 1913 that the 16th Amendment was past that made the personal income tax a fixture that we know it as today. As you can guess there were many “promises” by politicians that this tax would only impact a few of the very wealthiest people in the country, and would never be more than a few percent of the individual’s income.
Now that we know the history behind the federal income tax, let’s take a look at some numbers to see the impact of the tax. Would our country really be wiped out without a federal income tax? If you look at the breakdown of the total revenue the federal government takes in, about 45% comes from the personal income tax. That might sound like a lot but lets look deeper. This year, 2011, the proposed federal budget is roughly $3.82 Trillion dollars of expenditures, total revenue of $2.17 trillion, and that leaves a budget deficit of $1.65 trillion. If you calculate what 45% of the total revenue would be this year it is roughly $970 Billion. Now here is an interesting point, if you were to subtract that amount and the subtract the budget deficit from the federal budget you would be just above what our 1997 federal budget expenditures were. If we can find a way to cut our budget back to 1997 levels we could eliminate both a budget deficit, in which we must take on more debt, and we could eliminate the federal personal income tax!
So next time you hear someone talk of eliminating the federal income tax, give that person some credit, do not just classify them as a nut and say, “That’s just the way it is, Jack!” If we become informed we can make a difference in this country and in our community. I encourage you to look deeper and think for yourself on these important issues.
Thank you and God Bless!
The Federal Personal Income Tax
It is a shame that very few Americans today know how we even became a country; that the biggest reason we fought for freedom from England was taxes! Today the government takes a good portion of our income from us before we even get the chance to see it. In America today we are taught that having a personal income tax on work we do is the way it has always been. We are also taught that we must pay this tax so that the government can “take care” of us, and if we didn’t pay a federal income tax our country would be wiped out overnight. Well, lets take a look at the real history. When America first became a country the federal revenue was raised by two methods 1) tariffs and 2) luxury items, corporate bonds, and slaves. By 1817 the federal government did the unthinkable, they actually did away with ALL internal taxes and the only source of revenue was by tariffs on imported goods. This lasted until the Civil War and from 1862-1872 we had a personal income tax of 3%. So for the first 85 years our country was prospering we had no personal income tax, and 45 of those years we didn’t have an federal internal taxes. Now for the part you almost will never hear in school or read I in a textbook. In 1894-95 the federal personal income tax again surfaced. This time in 1895 the U.S. Supreme Court actual declared the personal income tax unconstitutional because it was not allowed by the Constitution. It was not until 1913 that the 16th Amendment was past that made the personal income tax a fixture that we know it as today. As you can guess there were many “promises” by politicians that this tax would only impact a few of the very wealthiest people in the country, and would never be more than a few percent of the individual’s income.
Now that we know the history behind the federal income tax, let’s take a look at some numbers to see the impact of the tax. Would our country really be wiped out without a federal income tax? If you look at the breakdown of the total revenue the federal government takes in, about 45% comes from the personal income tax. That might sound like a lot but lets look deeper. This year, 2011, the proposed federal budget is roughly $3.82 Trillion dollars of expenditures, total revenue of $2.17 trillion, and that leaves a budget deficit of $1.65 trillion. If you calculate what 45% of the total revenue would be this year it is roughly $970 Billion. Now here is an interesting point, if you were to subtract that amount and the subtract the budget deficit from the federal budget you would be just above what our 1997 federal budget expenditures were. If we can find a way to cut our budget back to 1997 levels we could eliminate both a budget deficit, in which we must take on more debt, and we could eliminate the federal personal income tax!
So next time you hear someone talk of eliminating the federal income tax, give that person some credit, do not just classify them as a nut and say, “That’s just the way it is, Jack!” If we become informed we can make a difference in this country and in our community. I encourage you to look deeper and think for yourself on these important issues.
Thank you and God Bless!
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