Tag Archives: irs

How Did It Happen?

Does anyone ever wonder how we got the income tax?  This tax has become so universal, on international, federal, state and even local levels, that it is taken for granted, but few people seem to question its legitimacy, history, or even its purpose.

An internet search suggests a form of “wealth tax” or income tax existed in the Roman Republic, ancient Egypt, and China, but the form we know, usually imposed to finance wars, began in England in 1188, by Henry II, for the “Saladin tithe” to fund the Third Crusade.

In his landmark book, Wealth of Nations, in 1776, Adam Smith, a Scott, suggested even the King of Britain could not get away with an income tax.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”  However, a mere nine years after Smith died in 1790, British Prime Minister William Pitt the Younger formally implemented the income tax, designed to pay for the French Revolutionary War, to purchase weapons and equipment.  It was a progressive income tax and in place between 1799 and 1816, but for a short reprieve following the Peace of Amiens in 1803.  It was reintroduced in Great Britain in 1842 by Prime Minister Sir Robert Peel, who was seeking revenues for the government’s increasing budget deficits.

“A heavy progressive or graduated income tax” is the second major tenet of the The Communist Manifesto, as delineated by Karl Marx and Friedrich Engels in 1848.  The fifth tenet advocates “Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive monopoly.”

In the United States, President Abraham Lincoln instituted the first US income tax in 1861 to pay debts from his war.  It was repealed by Congress in 1872.

The Socialist Labor Party pushed for an income tax in 1887.  The Populist Party demanded it in its 1892 platform, and the Democrats, led by William Jennings Bryan, advocated for the progressive income tax law passed in 1894.   Called the William-Gorman Tariff Act (Revenue Act), it reduced tariffs and imposed a two percent income tax but only on the top ten percent of earners.  In 1895, in Pollock v. Farmers Loan and Trust Co., the Supreme Court declared the tax unconstitutional, based on the constitutional requirements that taxation be apportioned by a state’s population.

Republican Rhode Island Senator Nelson W. Aldrich, who served between 1881 and 1911, was probably the single most influential individual in creating the financial structure we know today.  As chairman of the Senate Finance Committee–which oversaw bank regulation and monetary policy–he was possibly the most powerful man in the nation from 1898 to 1911. The financial Panic of 1907, (which some believe was engineered by banker and Aldrich friend/business associate, J. Pierpont Morgan) led to the Aldrich-Vreeland Act in 1908, which was designed to make the monetary supply more elastic.  It also established the National Monetary Commission with Aldrich becoming chairman.  As chairman, he led a team of “experts” to European capitals to study their banking practices, and returned as a proponent of a national banking system.  He worked in secret with powerful bankers to develop the “Aldrich Plan,” which eventually formed the basis of the Federal Reserve Act of 1913.  The secret dealings that began in 1910 and led to the creation of the Federal Reserve system is well documented in The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin.

Aldrich, who apparently had a habit of publicly opposing things he wanted, then voted in Congress for the corporate income tax in 1909, claiming this was to insure the personal income tax would not be passed.  Ten years before, he had called the income tax “communistic.”  However, later he and President William J. Taft then agreed that a constitutional amendment would be more effective in overriding the Supreme Court’s objections the 1894 law.  Aldrich claimed he believed the 16th amendment would never be approved.

The relationship between the Federal Reserve System and the new income stream generated by the income tax is not well documented, but it resembles that of the Whiskey Tax and the nation’s first central bank in 1791.  At that time, Treasury Secretary Alexander Hamilton introduced legislation for the whiskey tax on December 13, 1790 and for the central bank the next day, on December 14, 1790.

A common thread in the two bank/taxing schemes was that they gave the federal government the authority, if not the right, to investigate every taxpayer’s personal property and bank accounts searching for infractions, and to seize property it decides has been obtained illegally.  This has set the precedent for the federal invasion into private lives that has become so prevalent today.

In the “Gilded Age,” Nelson Aldrich was well known for his close and unsavory ties to business, by which he had become personally wealthy.  He believed his power base would successfully defeat the income tax amendment.  Indeed, while they were opposed, their solidarity had broken down, so individuals like Andrew Carnegie and John D. Rockefeller (whose son John Jr., married Aldrich’s daughter Abby) formed tax-exempt foundations to shelter their wealth before the tax went into effect.

At that time the income tax was promoted as a “class tax,” with only the upper income earners affected, so the idea of wealth re-distribution appealed to lower income earners.  Only later did President Franklin D. Roosevelt expand the “class tax” to a “mass tax,” according to former IRS historian Shelley L. Davis in her book, Unbridled Power: Inside the Secret Culture of the IRS.

Proponents of the income tax used other arguments, too.  It was proposed as a more reliable method than tariffs for raising federal revenues, and gave President Woodrow Wilson justification for reducing tariffs.  Also at that time the idea of Prohibition was in the air, and advocates of Prohibition recognized the government would lose income from excise taxes on alcohol.

The 16th Amendment reads, “The Congress shall have the 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.”  It was passed by Congress on July 2, 1909 and sent to the states for ratification.

It was supposedly ratified by the requisite number of states by February 13, 1913.  However, there is some question about whether it was ever properly ratified.  In 1985, William J. Benson published The Law that Never Was about the income tax.  Here, Benson claimed that in 1984 he had visited national archives and all 48 state capitals looking for records of ratification.  Not only had he found variations in wording and punctuation from the congressionally approved amendment, but he claimed some states which were certified as ratifying never did or voted against the amendment.  He said only two to four states had ratified as written.

Constitutional amendments require ratification by three-fourths of states.  In 1913, there were 48 states, so 36 would have had to ratify.  Benson found that seven states had not ratified at all.  1913 Secretary of State Philander Knox had claimed Kentucky and Tennessee ratified, but Benson said they did not.  Eight states were reported as having ratified, but Benson found no evidence of it.  Six more states did approve, but the governors or other officials required to sign did not sign.  Twenty-five states violated provisions of their own constitutions in ratification, and 29 violated state procedures.  Twenty-two states changed the wording to ratify, one state changed spelling, and 26 states changed punctuation.   Oklahoma changed the wording to say the opposite of what the amendment said.  Tennessee law required a delay until the next session but ignored it.

The American Law Division of Congress’ Congressional Research Service responded in May, 1985 to Benson’s claims.  “While it didn’t rebut Benson’s factual claims,” it said the amendment had been ratified “because Knox said it had been ratified,” says one internet source.

In 1990 Benson went to prison for tax evasion.  He served 15 months before a federal appeals panel overturned the conviction, saying a government witness had given improper testimony in the 1987 trial.  This occurred less than one month before Benson was scheduled for parole.

Benson’s book caused quite a stir, and he was selling packages based on his book to help individuals fight the Internal Revenue Service.  However, those who have used his arguments have not fared well in court.  Also, Benson himself was the loser in court rulings in 2007 and 2009 that determined his “Reliance Defense Package,” which he sold for $3500 to tax protesters, was fraudulent.

Courts have denied requests for evidentiary hearings and have refused to hear the arguments against the 16th amendment itself, claiming “Secretary Knox’ decision is now beyond review.”

In an interview in 2013, Benson remained an income-tax evader and bragged he has never gone back to prison, despite his continued outspoken crusade against the 16th amendment.

 

 

 

The Cosmic Improv Group Puts the Robber Barons in Stitches*

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HUMOR/SATIRE

by Dr. Kathorkian, an alter-ego of katharineotto.wordpress.com
Inspired by The Robber Barons, by Matthew Josephson, 1934, 1962

Monday, December 24, 2007 – I speak to others’ souls.  This is why I can nab JP Morgan in the Cosmic Commune and discuss his debt to society.

“Are you satisfied,” I ask, looking up from my knitting, but only briefly, so as not to lose any stitches.

 

“No,” says he.  “I’m miserable.”

“Good,” I say.  “You’re finally getting honest.”

“I always was honest,” he says.  “I named my three yachts Corsair I, II, and III, after all.  ‘Corsair’ means ‘pirate.’  Everyone knew what I was doing.”

“And no one stopped you.”

“No one even tried.”

“You made their chicanery look innocuous.  You were used by the thieves to cover for their less evident dishonesty.”

“I showed how easy it is to corrupt everyone.  They can all be bought.”

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Twenty dollars in pennies.  A penny buys a penny’s worth every time it changes hands.  If it changes hands 100 times in a day, it stimulates the economy more than a dollar kept in a wallet.  Adam Smith, author of Wealth of Nations, recognized the value of a penny.

“You haven’t named a price that can buy this free market capitalist,” I say.  “What’s it worth to you, to help fix this mess?”

“Everything I have,” says he.

“Well, you are morally bankrupt, and in so much debt it will take several lifetimes to work it off, so it’s up to you whether you want to be a New York City bag lady next time around.”

I go back to knitting.

JP Morgan sits, sweating bullets, but too embarrassed to remove his jacket, because he has severe BO.

Meanwhile, Andrew Carnegie is hanging around, hopping from foot to foot, waiting to be noticed and invited to participate.  I see his ankle is in a golden shackle, attached by a golden chain to a bejeweled shackle around JP Morgan’s ankle.

 

I invite Andy to join us, but make it quick, because I need to leave soon, to pluck the fruits of my cosmic garden, tax-free products that have grown without government help and in spite of favoritism to people like them.

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Pecan tree and Spanish moss

I know John D. Rockefeller is listening from a table on the other side of the honeysuckle hedge.  He is sneaky, doesn’t want to admit he’s interested.  He is slowly getting drunk and justifying his actions to himself.  Besides, he hates JP Morgan and doesn’t like to deal with him at all, if possible.  He merely wants to sabotage him.

So I count rows and stitches while JP and Andy unburden their weary souls. Rockefeller’s presence is known–he is bound to the others by his own shackle and chain–but he is not acknowledged.

Other Cosmic Communists are coming and going, but the three souls within range don’t see or hear them.  They feel alone and abandoned but for each other and me.  This makes our discussion semi-private, for their purposes, which is fine with me, because it eliminates distractions.

Andy is the most heterosexual of the bunch.    JP and JD prefer to sublimate sexuality to imperialism, so lust after domination for its own sake.  Because they are cowards, they make a show of being otherwise, in true reaction formation style.

“You become what you hate,” Buddhism states.

“Or what you love,” I add.

Suddenly JP and JD realize they spent their lives symbolically sodomizing each other and everyone else who crossed their paths.  Now they wonder why no one in the Cosmic Commune invites them to parties.

“You’re boring, that’s why,” I tell them.  “What can you do that’s useful?”

I hear JD comment on Rockefeller Plaza. I remind him he didn’t build it, it’s an insult to the people who paid for it, and it’s ostentatious.  Ditto for donations to the Met, Carnegie Hall, and Carnegie Mellon.  “You people wanted to buy love and respect with other people’s money,” I say.

So now we know Rockefeller is participating, too, even though he remains at his table.

“What about abolishing income and payroll taxes and the Federal Reserve System,” I ask JP Morgan.  “Even though you have no credit with me, if you help undo that tangle in this time knot, it might improve your seedy image and win you a friend or two.”

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JP gets restless and starts looking at his watch.  He hems and haws.  Andy looks on.  He has suddenly become very quiet.  Rockefeller pours himself another drink, and I hear the tinkle of ice against glass as his hands shake.

“Well, you boys think about it. These are my terms, for the moment, but no promises.  Things are likely to change any time.”

I poof out of their milieu and return to my cosmic home, where everything is free, and money doesn’t exist.

 

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Knoxville, Tennessee City Market, with Tennessee Valley Authority twin towers at far end. Kco0206

Tuesday, December 25, 2007 – Later, I revisit the area in the Cosmic Commune where JP Morgan, Andrew Carnegie, and John D. Rockefeller are chained together by golden chains.  This place reminds me of the “revitalized” Knoxville, TN City Market.  It is a wide, concrete wasteland with no human beings in sight.  The twin towers of the Tennessee Valley Authority loom over one end.

I have poofed myself a garden in this heat sink.  The garden has grown since my last visit.  Now, there are trellises and vines of roses without thorns.  Confederate jasmine, wisteria, and the like.  There is a water fountain, where birds drink and splash around.  The mass of vegetation creates the effect of a giant atrium, open to the breeze but protected from the sun.

 

I see Clarence Thomas’ higher self happening by, so I invite him to join us.  The older boys are impressed and a little afraid of ole Clar, because he is a Real Man, a black male, Supreme Court Justice, and Southern gentleman, despite what Anita Hill claims.  They want to impress him.  I show the chain gang I mean business.  CT is on my side, whether he knows it or not.

JP starts kissing up to Justice Thomas, explaining how taxpayers weren’t ready to manage their own money back in 1913, but he thinks they may have matured enough by now.  Ole Clar says don’t talk to me.  Talk to your boys on Wall Street, like Rupert Murdoch.  If you people can shape up real quick-like, we won’t have to embarrass you in front of your international friends.

So all these men start telling me how to pull this off.  They tell me to mail some of my improved-upon news clippings to Paul Gigot, editorial page editor of the Wall Street Journal, specifically my GE cartoon of CEO Jeffrey Immelt.  I should include a copy of my letter and GE’s 43-cent check SunTrust bank wouldn’t take.

So I say okay.  I’ll do it when the spirit moves me.  I’ve already started making copies.

Meanwhile, women are beginning to show up, because they like rich, influential men.  I’m fine with this, because I’ve solved enough of their problems for one day, and I have homework to do.  I poof myself back home, while they hang out and chitchat.

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