Phil Hart has recently addressed this question and has answered in the affirmative. Mr. Hart is the author of the book, Constitutional Income: Do You Have Any?
Excerpts from a recent article, “Obamacare Income Tax Surcharge Unconstitutional,” follow:
December 24, 2009
The current attempt by today’s White House Administration to impose more big government on the American People by way of the “single payer option” for healthcare is as unconstitutional as gun confiscation or the elimination of free speech. Obamacare will be funded with a health care surcharge on the today’s income tax, which constitutes an unapportioned direct tax on the wages and salaries of the American People, not allowed by our Constitution.
How so you might ask? Good question. In order to answer that question, we must first review “Constitutional Taxation 101” a course that no lawyer ever took, nor has any judge, member of Congress nor has any PhD candidate in constitutional law. Law schools do not teach courses about the Constitution; they teach courses about litigated cases about the Constitution. The American People are nearly 100 percent illiterate, at all levels, when it comes to constitutional taxation. The higher the level of ignorance among the American people, the greater the amount of fleecing that takes place.
To understand constitutional taxation, we must first understand the terms of the Constitution’s Framers. What is a direct tax? And what is an indirect tax? In 1787, those terms were widely used by the Framers as they debated and drafted our Constitution. These framers knew the meaning of these to terms. Very simply, a direct tax taxes a “noun”, and an indirect tax taxes a “verb”.
What is a tax on a noun? It is a tax on something that exists. A house exists. A tax on a house is a direct tax. The tax is levied on the house, and the tax must be paid. There is no getting out of paying a direct tax. Either the tax gets paid, or the house is eventually seized by the taxing authority. “Labor” is a noun too; and a tax on labor is a direct tax; it is a capitation tax, which must be apportioned.
The next question that begs to be answered is, “What is a tax on a verb?” This is a tax on the happening of an event. It is a tax on a choice a person makes. It is a tax that can be avoided, or the burden of the tax can be shifted to another. If you choose to buy gasoline, you choose to pay the excise tax on each gallon of gas. You could, of course, choose to ride your bicycle and avoid the tax. You pay the indirect tax because of choices you make.
If you are a bus company, you have to pay this excise tax when you put fuel into the fuel tank of your bus. However, you pass on the cost of the tax by charging more for the bus tickets; and the customers of the bus company pay the tax “indirectly”. Again, this tax can be avoided if the bus patron chooses not to travel, or to travel by some other means. An indirect tax is also a tax on a privilege, like operating a business in a corporate form. One chooses to do business as a corporation, and in doing so, chooses to pay the tax levied on the government granted privilege of limited liability and indefinite corporate existence.
We refer to Adam Smith, author of Wealth of Nations (1776), to support our above definitions. Adam Smith began writing his timeless work in 1765. By the time the Constitution was written, in 1787, Wealth of Nations was in its sixth edition. Every one of the Framers of the Constitution was familiar with Smith’s work. Here is what Adam Smith, the eighteenth century guru of economics, had to say about direct and indirect taxes:
“The impossibility of taxing the people, in proportion to their revenue, by any capitation, seems to have given occasion to the invention of taxes upon consumable commodities. The state not knowing how to tax, directly and proportionally, the revenue of its subjects, endeavors to tax it indirectly by taxing their expense, which, it is supposed, will in most cases be nearly in proportion to their revenue. Their expense is taxed by taxing the consumable commodities upon which it is laid out.” Adam Smith, Wealth of Nations, book V, pg. 541 (Prometheus Books, Amherst, New York, 1991) (1776).
We also find the following Adam Smith quote in Wealth of Nations, “Capitation taxes, so far as they are levied upon the lower ranks of people, are direct taxes upon the wages of labor.” Adam Smith, Wealth of Nations, id. at pg. 540.
A Capitation tax is a tax on wages and salaries, so says Adam Smith. Such a tax must meet the constitutional requirement that it be apportioned among the people, such that each person pays the same amount of tax.
Any tax on wages or salaries, when that tax is paid by the paycheck’s recipient (and not by the employer) is a direct tax. In fact, it is a “capitation tax.” As such, the Constitution requires that such a tax be apportioned among the several States (see Art. I, sec. 2, cl. 3; and Art. I, sec. 9, cl. 4).
The Framers of the Constitution were so serious about this apportionment requirement for direct taxes; it is likely the United States would have never survived the Articles of Confederation without it. The great compromise that kept the 1787 Constitutional Convention from blowing apart was when the Framers traded the apportionment provision requirement on direct taxes for the provision that each state (including the small states) were to get two senators in the Senate. Consequently, we should honor what those men did in Philadelphia in 1787 by respecting this very constitutional requirement today.
Judicial History
Now you might think, “Doesn’t the Income Tax Amendment of 1913 (The Sixteenth Amendment) provide for an exception to the constitution’s apportionment requirement for direct taxes so that Obamacare can be funded by an income tax surcharge on our wages and salaries?” Well, that is what the parties on both sides of the case thought in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1916) and in Stanton v. Baltic Mining, 240 U.S. 103 (1916). These were the first two cases that litigated the newly imposed income tax after the “Income Tax Amendment” was added to the Constitution in 1913.
All the parties to these cases argued that the Sixteenth Amendment provided for a new tax, that being a direct tax that did not have to be apportioned, nor did it have to be subjected to any regulating constitutional rule. Thirty-five times in the Stanton Case, the argument was made that the Sixteenth Amendment provided an exception to the apportionment requirement for a direct income tax….
After reviewing the historical evidence relating court tests of the meaning to be given to the 16th Amendment, which purportedly authorized a new direct tax that did not have to be apportioned across the states, Hart concludes as follows.
The conclusion is obvious. Any income tax surcharge on our wages and salaries constitutes an unapportioned direct tax not allowed by our Constitution. But wait a minute, is the surcharge any different than the underlying income tax on wages and salaries that Americans have been paying since World War II? No it isn’t. The Obamacare income tax surcharge and the underlying income tax on wages and salaries are both unapportioned direct taxes and are both unconstitutional.
Ah, but there are some narrow exceptions to my above blanket statement. The apportionment rule reads: “No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration hereinbefore directed to be taken.” Art. I, sec. 9, cl. 4. And notice that it only applies to the “several States”. It does not apply to the territories, possessions and districts under the exclusive jurisdiction of the United States. In fact, our Constitution allows Congress to act as a dictator in these areas. (See Article 5 “Needful rules.”) Therefore, any unapportioned direct tax levied in the territories, possessions and districts is quite constitutional.
There is one other exception to my conclusion, and that is for a person employed by the federal government who works and or lives in the several States. The federal government can, if it wants to, declare that working for the federal government is a privilege. Then, the federal government can tax that privilege with an indirect tax. This tax is avoidable because one can choose to not work for the federal government and avoid the tax. It is a tax on a verb.
But outside of these two narrow exceptions, there is no authorization for an unapportioned direct tax on Americans living and working for private sector companies within the several States.
How did we get to where we are today? Today’s tax system is a result of the almost complete ignorance among the American People as to what taxes the Constitution allows, and what taxes are constitutionally unauthorized. In today’s national debate on the Fair Tax, on the Flat Tax, on a national sales tax, there is zero debate on what type of taxes we are talking about, “direct taxes” or “indirect taxes”? I personally find it eerie that there is no debate as to what taxes are allowed by the Constitution. Have we lost our way? Upon what point do we use to zero our compass?
“The purpose of the income tax was to bring tax relief to wage earners.” The Peoples’ Income Tax Guide, “Brown’s Agenda: Tax Relief for Wage Earners.”
The first income tax statute was passed as part of the Underwood/Simmons Tariff Act on October 3, 1913. As it was the purpose of the income tax to bring tax relief to wage earners, the Underwood/Simmons Tariff Act imposed the lowest tariffs since the civil war while creating the first modern income tax authorized by the Sixteenth Amendment. However with the Sixteenth Amendment’s vague language the fix was in to grow the income tax into something much more massive that would be coupled to the Federal Reserve System, which was also passed by Congress on December 23, 1913. Today the income tax is used to harvest money out of the economy so that the debt creation/money creation machinery of the Federal Reserve System can run faster without creating massive inflation….
The same thing can happen with Obamacare and the income tax. As long as most lawyers in America, most judges, most members of Congress and nearly every Citizen is 100 percent ignorant as to what taxes are allowed by the Constitution, the federal bureaucracy will get away with their unconstitutional fleecing of the flock. However, if enough Americans do their homework and take on the individual responsibility of self-government and understand what is going on all around them, we just might have a shot of returning to a constitutional taxation system.
Mr. Hart is only one of many writers who have taken up the constitutionality of the income tax and, in particular, mandated purchase of health insurance. Interestingly, the State of Washington has no individual and corporate income tax. It has been found to be unconstitutional relative to the state constitution. The foregoing link is to an opinion by the state attorney general in 1974. Apparently, the state supreme court decision declaring the state income tax unconstitutional has never been reversed .
Go here and here and here and here and also here for a discussion of the travesty growing out of the insane confusion surrounding the federal income tax. Also, check out this video of a report of a former juror in a failure to file case.
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