Constitution 101: Powers of Taxation – Funding or Social Engineering?


Alexander Hamilton, one of the Founders, the first Secretary of Treasury, stated:

Money is, with propriety, considered as the vital principle of the body politics; as that which sustains its life and motion, and enables it to perform it most essential functions. …an indispensable ingredient in every Constitution. From a deficiency in this particular, one of two evils must ensue; for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in a short course of time, perish. … What remedy can there be for this situation, but in a change of the system which has produced it? …

Indeed, the tax system requires extensive change.

Article I, Section 8, Clause 1 of the Constitution of the United States is known as the Taxing and Spending Clause. It reads:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

Is the income tax “uniform” when it has a progressive tax rate that is now 35% of taxable income of people of the wealthy class?
Is the present income tax system “uniform” when one corporation will pay a certain percentage in taxes, another a different percentage, and still another paying nothing at all for a specified period?
Congress over the decades has used taxation for more than its original intent – to raise revenue. As examples:

In 1922, the Supreme Court struck down a 1919 tax on child labor in Bailey v. Drexel Furniture Co.,[13] commonly referred to as the “Child Labor Tax Case”. The Court had previously held that Congress did not have the power to directly regulate labor, and found the law at issue to be an attempt to indirectly accomplish the same end. This ruling appeared to have been reinforced in United States v. Butler,[9] in which the Supreme Court of the United States ruled that the processing taxes instituted under the 1933 Agricultural Adjustment Act were an unconstitutional attempt to regulate state activity in violation of the Tenth Amendment. However, despite its outcome, Butler affirmed that Congress does have a broad power to tax, and to expend revenues within its discretion. Butler was the last case in which the Court would find a constitutional limitation on the power of Congress to tax and spend.

The entry is outdated for the so-called ObamaCare program was under recent scrutiny for just such purposes, with the result from the Supreme Court that while it was okay for government to mandate and control private health care issues, it was not okay to use a tax to punishthose who did not comply to government authority over private enterprise.
Whatever the outcome, government is allowed to misuse its power of taxation and carry it to such extremes as to cause economic ruin for the American people.
In South Dakota v. Dole, the Supreme Court upheld a federal law, which withheld highway funds to states that did not raise their legal drinking age to 21.
Various places within the Constitution and in one amendment there are clauses that discuss congressional power to tax and spend. In the origination clause, all bills for raising revenue must originate in the House of Representatives, because it is the branch closest to the people and presumably knowing best the conditions of the people in terms of economics. Representatives are regarded as the most accountable of government officials to the people, so the idea is that there will be less chance of abusing tax power. History shows this to be a fallacy. It is more likely that not enough of the People get involved and/or do not even know what is in THEIR constitution or what it means.
The General Welfare Clause is another abused system within the Constitution. This clause has been a controversy and argument over welfare and what is now called entitlements, as if they were rights written within the Constitution. Too many Americans today believe it is their right for government to exercise income and wealth distribution, where one sector’s income is taken by law, by government, and given to another sector of the populace – as the government sees fit.
The first dispute concerns whether the general welfare clause grants independent power or is a restriction upon the taxing power. The second controversy is just exactly does the Constitution mean using the phrase general welfare. The Federalist Paperswere written explaining and discussing just what is in the Constitution and arguments over why it should be so. The two primary authors of the Federalist Papers:
  • James Madison, who advocated for the ratification of the Constitution in the Federalist Papers

…asserting that spending must be at least tangentially tied to one of the other specifically enumerated powers, such as regulating interstate or foreign commerce, or providing for the military, as the General Welfare Clause is not a specific grant of power, but a statement of purpose qualifying the power to tax.

  • Alexander Hamilton – only after the Constitution had been ratified did he argue for a more broad interpretation that covered –

…enumerated power Congress could exercise independently to benefit the general welfare, such as to assist national needs in agriculture or education, provided that the spending is general in nature and does not favor any specific section of the country over another.

The essays of the Federalist Papers has become an essential reference to the meaning of the Constitution, the reasoning and justification as presented by the Framers and its intent of limiting powers of government.
Before 1936, the United States Supreme Court did not rule much of an interpretation of the General Welfare clause, which was subject in Bailey v. Drexel Furniture Co. in 1922, in which a tax on child labor was impermissible. The case of United States v. Butler in 1936 overturned that previous Supreme Court decision.
Associate Justice Joseph Story relied upon the Federalist Papers, collection of essays, as a source for his Commentaries on the Constitution of the United States in which he rejected the nationalist view of Alexander Hamilton, but approved of Hamilton’s broader spending view. The court of 1936 agreed with Justice Story’s in the powers of taxation:

The [General Welfare] clause confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. … It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution. … But the adoption of the broader construction leaves the power to spend subject to limitations. … [T]he powers of taxation and appropriation extend only to matters of national, as distinguished from local, welfare.

However, the tax imposed in the Butler case was held unconstitutional and in violation of the Tenth Amendment reservation of power to the states. Shortly after that, the Supreme Court expanded the clause in Helvering v. Davis, thereby, conferring upon Congress the power to impose taxes and to spend money for the general welfare almost entirely upon the Congress’ discretion.
Thus far, the Hamilton view of General Welfare clause is predominating in cases of law.
Article I, Section 9, Clause 7 imposes accountability on Congressional spending …

No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

16th Amendment, the amendment that changed the course of our government:

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.

In light of recent arguments over the so-called Fiscal Cliff, including the campaign negative (and untruthful) accusations against opponents concerning their “fair share” of payment in taxes, it is most beneficial for all to reform the tax system starting with a flat income tax with NO deductions allowed. Those income taxes shall not be laid upon dividends or interest income nor the so-called death tax in which the estate is taxed [against the heir(s)] because the person who deceased already paid taxes upon the property and income collected. If HR 25, the Fair Tax Act, proves to be beneficial and efficient, and constitutional, that legislation should be passed and at the same time the 16th Amendment repealed (and ratified legally) in order to institute a fair, efficient, and non-intrusive tax system. Only if  that House bill (and Senate bill) is more tailored to what the Constitution dictates and reasoning within the Federalist Papers essays written by those who constructed the Constitution and its amendments. [See Original Intent]
Like the Social Security Act of 1935, (it included unemployment compensation) — the income tax system is practically unidentifiable to the framers’ intention or the original intent of the legislation, most evident when one sees how much the income tax code system has grown in the number of pages.
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