Liberty Amendments V - Limit Federal Taxing

STOP! This Amendment Does Not Give the Relief Required!

SECTION 1: Congress shall not collect more than 15 percent of a person’s annual income, from whatever source derived. “Person” shall include natural and legal persons. 

SECTION 2: The deadline for filing federal income tax returns shall be the day before the date set for elections to federal office. 

SECTION 3: Congress shall not collect tax on a decedent’s estate.

SECTION 4: Congress shall not institute a value-added tax or national sales tax or any other tax in kind or form. 

SECTION 5: This Amendment shall take effect in the fourth fiscal year after its ratification.

Levin, Mark R. (2013-08-13). The Liberty Amendments: Restoring the American Republic (p. 75). Threshold Editions. Kindle Edition.  product. 

This is a rather disturbing proposal.  We definitely require a tax amendment to limit the Government's ability to tax but I have to question whether this is the right approach.  I am not an economist - but Mark correctly points out that this country was built without economists; economists only came to us along with progressiveness in the late 19th century and through the 20th century.

But there's another interesting change in the US that came with economists and progressivism: income tax.  Prior to the 16th Amendment, the primary revenue generation of the Federal Government was through tariffs on consumable goods - not on raw materials. Alexander Hamilton, the 1st Secretary of the Treasury, saw the value of tariffs in revenue generation and in protecting American manufacturing:

1. Protecting duties -- or duties on those foreign articles which are the rivals of the domestic ones intended to be encouraged. Duties of this nature evidently amount to a virtual bounty on the domestic fabrics; since, by enhancing the charges on foreign articles, they enable the, national manufacturers to undersell all their foreign competitors. The propriety of this species of encouragement need not be dwelt upon, as it is not only a clear result from tile numerous topics which have been suggested, but is sanctioned by the laws of the United States, in a variety of instances; it is the additional recommendation of being a resource of revenue. Indeed, all tile duties imposed on imported articles, though with an exclusive view to revenue, have the effect, in contemplation, and, except where they fill on raw materials, wear a beneficent aspect towards the manufacturers of the country.

Alexander Hamilton, Report on Manufactures, December 5, 1791

Many argue against import tariffs, stating that they are limits on free trade and free enterprise and that, as a result of those limits, business does not create wealth or jobs.  The history of using tariffs as the primary means of revenue generation from 1789 until 1913 proves that business can grow just fine with import tariffs.  It is also important to remember that the United States is not a capitalist nation first and foremost, it is a Constitutional Republic.  Protection of the individual is the job of Government, and not protection of corporations.  If higher taxes on corporations increase prices, untaxed citizens will have increased financial capacity to pay the prices.

With the passing of the 16th Amendment in 1913, US citizens became subjects of the now-National government and now had to pay direct taxes to the National Government.  No longer was the Government a Federal Government, being the federation of the various states but is now a National Government, with direct subjects.  There is another piece of the nationalization of government: the 17th Amendment that took all voice in the actions of the government away from the States.  These two amendments ended the Republic that we once were.

Mr. Levin proposes a tax limiting amendment that leaves us subjects of the National Government.  I understand that repealing the 16th Amendment is not a popular subject and I hate to think that Mr. Levin is showing progressivist tendencies here.  I am big fan of Mr. Levin but this is troublesome.

The tax reform amendment that we need is to repeal the 16th Amendment and add a clause that prevents any direct tax, apportioned or not except possibly a sales or value added tax - but not both.

If we are to progress Mr. Levin's proposal, though, there are other changes that must be made.

Section 2 is great.  If we're going to pay income tax, the bill should be due the day before voting.

Section 3 will end up debated in the courts for a long time.  What happens if taxes are already owed by the decedent?  Surely those should be collected.  This section might require that no separate  tax be imposed on the estate.

Section 4 is a bothersome section in that we should not have an income tax at all and if we don't have an income tax and want a tax other than tariffs, or in addition to tariffs, the sales tax or value added tax are excellent options, especially if combined with an amendment clause that forbids tax credits other than cash payments to the IRS.

Section 5 is vague and does not make it clear when the amendment would take affect.

Here's my recommendation on how to limit Congress' taxing authority:

SECTION 1: The 16th Amendment to the Constitution is hereby repealed.  Congress shall make no direct tax upon persons in the United States, apportioned or otherwise, except as provided for in SECTION 2 of this Amendment.

SECTION 2: Congress may implement a sales or value-added tax at a maximum rate of 10 per cent of the actual sales price or of the value added - but not both taxes on any one transaction.  Sales tax shall be imposed at the time of the transaction and reported annually by the person receiving the payment without personally identifiable information on the buyer. 

SECTION 3: No tax credit shall be given to any person or legal entity except for payments made on account by that person or entity for the tax year for which the  payment is made.   

SECTION 4: No exception or waiver of any Federal tax shall be granted to any person or legal entity without the majority vote of both Houses of Congress, being then signed into law by the President and also receiving the consent of the legislatures of at least three fifths of the states of the union at the time the waiver is approved.  

SECTION 5: No separate tax shall be applied to the estate of any deceased person.  Taxes owed before the death can be recovered from the estate.   

SECTION 6: The deadline for all tax returns for persons or legal entities shall be the day before the election for Congress or the President in those years when congressional or presidential elections are held.  For years in which there is no congressional or presidential election, the deadline shall be on the day before the calendar anniversary of the previous year's election.  

SECTION 7: The changes in this Amendment will take affect starting with the next fiscal year starting on or after the fourth anniversary of the ratification of this amendment.

Mr. Levin is correct in that we really need a hard limit on Congress' ability to tax us. For 124 years, common sense and decency constrained the Congress but they no longer feel the constraint of decency or right. But Mr. Levin's well-intentioned proposal hardly leaves us in a better place than we are now.  It still leaves us as subjects with each one of us having to bow to the National Government at tax time each year.  But Mr. Levin's proposal does not provide the relief required and should not be passed by any Constitutional Convention.