Freedom Cannot Coexist With an Income Tax
Posted by Kevin McKee on January 23, 2012If you’ve been paying any attention to the politics of the Republican Presidential Primary, you may have heard Ron Paul give one of his favorite one liners when talking about the income tax. I’m paraphrasing because I can’t find the actual quote, but it goes like this:
Some people complain that 50% of Americans pay no federal income tax. I say we’re halfway there.
Think about that for a minute. Zero income tax.
When you make money, you get to keep it. All of it.
Wouldn’t that be nice?
0% Income Tax Has Been Done Before
There is historical precedence for eliminating the income tax entirely. With a few exceptions during wars, there was no federal income at all in America until 1913. That’s well over a century of 0% income tax.
The government had other methods of income, just as it does today, and individual income was not taxed. What a concept!
Contrary to what some may believe, the government wouldn’t go broke today if we repealed the income tax. In 2011, the government collected $2.3 trillion in revenue, where only $1.1 trillion of that was from personal income tax. If the size of government is reduced, we could easily eliminate the individual income tax and run the entire federal government on $1.2 trillion. Heck, that’s all the government spent in 1982; just 30 years ago.
Now that we know America could exist without an income tax, it’s important to understand why America should exist without an income tax.
The Government Doesn’t Own a Free Person’s Income
There are plenty of economic reasons it should be eliminated, but I will save that discussion for another day. The main reason the income tax should be eliminated is that people cannot be free when government has unlimited power to tax income.
We are all conditioned to accept the income tax because it’s been around for as long as we’ve been alive, but do we really think about what actually happens?
The government sets the tax rate, which means they tell people how much money they are allowed to keep. Telling someone his tax rate is 35% is no different from telling someone you’ll let him keep 65%. In America today the government owns 100% of our income, and is “nice” enough to allow us to keep some of it.
You may think I’m being ridiculous. There’s no way the government would take 100% of our income!
Did you know the highest tax bracket in in 1944 was 94%? The government took $0.94 of every single dollar earned in that tax bracket and only allowed the person actually doing the work to keep $0.06.
I don’t know about you, but I don’t consider myself “free” when my government is one vote away from taking 94% of my income.
But the Government Does Own YOUR Income
As the laws are on the books today, the government owns 100% of your income. There is nothing stopping them from reinstating the 94% tax bracket, and there’s nothing stopping them from raising it even further to 100%. The only reason you get to keep anything you make is because politicians have decided not to implement 100% income tax rates.
That doesn’t sound like freedom to me.
photo credit: 59937401@N07
I think that this information is misleading. The way that tax brackets in 1944 were structured (much like they are today) the person in the “94%” bracket would not be “giving away” 94% of his/her income. For example, the highest tax bracket in 1944 was for folks who made over $200k. IF someone was to make $201k in 1944, they would be responsible for $94230 in taxes – or roughly 47% of their income.
Now… keep in mind that $200k in 1944 is $2.2M in today’s money. So let’s look @ what someone making $2.2M OF TAXIBLE INCOME would pay today w/ today’s tax brackets (Assuming “head of household”). They would end up paying $744k in taxes, or roughly 34%.
But… I think that we can both agree that a comfortable life could still be maintained at $1.45M.
Seriously, I’m not going to cry over this. People who made a reasonable income in 1944 were taxed appropriately. If I made the equivalent of $100k in 1944, that would be ~$8k then, and I would be in the 33% bracket, but would end up paying $2200 in taxes – effectively 27.5%. Today, $100k would put you in the 25% bracket – but you’d end up paying just under 20% ($19,767).
Historical brackets can be found here: http://www.taxfoundation.org/taxdata/show/151.html
What you say about the tax brackets is all true, but I disagree that I was misleading in any way. I’ll quote myself, with emphasis added:
The government took $0.94 of every single dollar earned in that tax bracket and only allowed the person actually doing the work to keep $0.06.
You also conveniently ignore the person who made $2 million in 1944. Or $20 million? What were their overall tax rates?
Plus I think you missed the point. I’m not taking issue with 1944 tax rates; I’m taking issue with the fact that a group of 536 people (congress plus the president) have a “right” to tax as much as 100% of every Americans’ income under our current laws if they choose to do so.
I didn’t miss your point. I don’t agree with it, but I’m not going to take issue with it either.
I was trying to emphasize that just because you make $ABC/yr and that $ABC is in the X% bracket – you’re not going to be paying X% in taxes. For example, the cutoff between the 15% and 25% bracket is $46,250. A lot of people believe that if you made $46,249 you’d be subject to $6937 tax and if you made $46,251 you’d be subject to $11,562 – Effectively making more to keep less. (So what’s the incentive to make more!?!)
Which, factually, isn’t the case. THAT is what I was trying to make clear. Saying it was “misleading” wasn’t (meant as) a shot at you – but more the term “tax bracket” and a common misunderstanding.
I left out the individual who made $2M in 1944 b/c it wasn’t exactly realistic. That would be like $25M anually today. What’s that – like a dozen or so individuals who are (still) US citizens?
Here’s a list of 25 pro athletes (not all subject to US taxes) who make $25M or more a year. http://www.therichest.org/sports/forbes-highest-paid-athletes/
Add people in Hollywood, CEOs of big companies, hedge fund owners, etc. I would think it’s closer to a few hundred.
But again, the volume of people subject to those taxes is not the issue. The real issue is the fact that our legal system allows 94%, or even 100% tax rates.
Are you proposing to cut an additional $1.1 trillion dollars from the US budget? If so what are you suggesting we cut? That is almost 1/2 of the taxes collected.
Alternatively, and more likely the government will increase other taxes to make up the shortfall… what taxes would like to be increased to make up the $1.1 trillion lost?
I do believe we can cut at least $1 trillion out of the budget immediately. There’s a pretty good plan to do it right here, which eliminates five cabinet level departments and reduces military spending. http://www.ronpaul2012.com/the-issues/ron-paul-plan-to-restore-america/
That doesn’t mean I’m ready to reduce tax revenues by $1 trillion immediately as well. The first thing we need to do is reduce the size of the federal government so we can balance the budget. Then we can reduce government even further, and any reduction in government after budget is balanced should coincide with a tax reduction for the people.
I think that if you want to live in a first-world country with a great amenities, the money has to come from somewhere. And yes, I feel that those who make more should pay more. I don’t believe anyone has ever made the decision to NOT earn as much money as they can because they were being punished for being successful by having to pay more taxes.
We also have a checks and balance system in place for a reason… the same goes for term limits. Good luck to the politician who is running on a 100% tax rate platform.
What “great amenities” are you talking about? What has the federal government done for me lately?
It has used my money to put soldiers on 900 military bases in 130 countries despite the fact that we aren’t in a declared war.
It has failed to stop illegal immigration because our troops are in Germany and Japan and Venezuela and everywhere else in the world except on our borders.
It has passed laws that make it legal to detain me and any other American citizen indefinitely without the right to a lawyer or a trial through the National Defense Authorization Act.
It takes money I’ve earned through my hard work and pays for things I don’t want it to pay for, and things it doesn’t have a right to pay for under the constitution.
I’d love to hear the great amenities you are getting.
Sorry, are you saying you don’t want a national defense at all? What about national parks, federal highways, education supplements, EPA, etc? Of course there are areas in each department that need to be trimmed down and spending cut, but I don’t believe in doing away with these all together. I also don’t believe state governments would be able to do any better…
I’m saying a want a national defense here in America, not spread out all over the world. I want parks, highways, education and the environment to be handled at the local level, as the founders of our country intended.
Here’s the nice thing about handling stuff at the state level. If your state wastes money and you don’t like how your taxes are being spent, you can move! I can’t just move to another country I’m not a citizen of to avoid paying stupid US federal taxes.
“Here’s the nice thing about handling stuff at the state level. If your state wastes money and you don’t like how your taxes are being spent, you can move!”
What, to another state? They’re all broke. And you want to move from a state without income tax?
“I can’t just move to another country I’m not a citizen of to avoid paying stupid US federal taxes.”
Of course you can move. Plenty of Americans working abroad, plenty of foreigners working here. And you’ll probably find that wherever else you move, your tax rate will be higher than it is here.
Look, Kevin: Ron Paul is not going to be elected, the 16th Amendment isn’t going to be repealed, Congress is not going to raise the personal tax to 100%. Ain’t going to happen, none of it. So kwityerbitchin and learn to live with things as they are, just like the rest of us. You don’t have it so bad here.
The only way you can work abroad is if another country grants you the right to do so. Just people some people do it doesn’t mean I, or anyone else, has the RIGHT to do it.
And I understand Ron Paul won’t be elected in 2012. I also understand that the idea of liberty and freedom won’t die. Sometime between 2016 and 2024, there will be a constitutional conservative running for president. If I can help just one person realize the liberty train is the one they want to be on, we’ll get there that much faster.
So you’re saying that you DO want a national defense…how would you propose we pay for that without federal taxes?
And are you saying you want to do away with these amenities too? Or move all them to the state level?
-Veterans benefits
-Social security
-Health Care for the elderly, disabled, and disadvantaged: Medicare, Medicaid, and CHIP (for children)
-Safety net such as school meals for disadvantaged children, childcare assistance, programs for abused children, low-income housing, assistance for the disabled
-Education
-Medical and scientific research – so much basic scientific research and breakthroughs are done through federal government grants. Every single one of us has benefited from this research!
A lot of necessary programs are funded by the federal government, many of which I am sure you are not aware of simply because you currently have no need for these programs. But there are many others who rely on these programs. And no one is immune to catastrophes or circumstances that would require such help from the government. I agree there is a lot of waste, and many of these programs can be better run….but I don’t think doing away with them or moving them to the state level is going to do much.
Em,
Yes I want a national defense. I also want to pay veteran’s benefits. But that doesn’t mean I want an income tax. As I stated above, the federal government pulls in well over $1 trillion a year from taxes outside of the income tax. We can use that to pay for the necessary programs.
To address your list, I don’t think the federal government should pay for social security (let people save for their own retirement), health care (we didn’t have medicare before 1965 and the churches and charities found ways to care for sick people), welfare (if it exists, it should be at a state level), education (should be as local as possible, preferably city or county level), or research (if anything put up a prize for accomplishing something. A grant gives someone money with no incentive for them to succeed).
So many people have this idea that if the federal government doesn’t do it that it doesn’t count. But it does. We may need all of the things you mentioned, but we DON’T need the federal government to do it all.
What term limits? except for the Presidency.
Term limits in the sense that one must get re-elected, or we have the ability to vote a new member in congress if the current member isn’t satisfying our needs.
Just curious:
Do you propose to bring about these happy libertarian results with or without repealing the 16th Amendment? Do you propose only to eliminate individual taxes, or also corporate, partnership, and fiduciary? Do you propose to eliminate state and local taxes too, or sales taxes? Do you realistically think any politician is going to vote to reinstate the 94% marginal – and I emphasize the word “marginal” – rate when there is almost total resistance within the Republican-controlled congress to restoring even Clinton-era marginal rates, and many want to make the Bush-era tax cuts permanent?
Of course I would like to repeal the 16th Amendment. You can have 0% tax rates, but with the 16th Amendment in place, there is nothing stopping politicians from raising the rate to 100% tomorrow. Sure, they might not get re-elected, but there’s still nothing stopping them from doing it.
I’m not saying there is no place for taxes. I’m saying if the federal government returned to its constitutional responsibility of protecting each individual’s right to liberty and property, we wouldn’t spend almost $4 trillion a year and we could reduce taxes on the people.
I’m much more in favor of a sales tax than an income tax, because it makes more sense. When you tax something, you get less of it. I’d rather have less consumerism than less working people. However, having both an income and a sales tax would be an outrageous affront to personal liberty.
If we just taxed investments more than we taxed salary, then we would solve this too.
Or, 9-9-9?
Please explain in more detail.
How does increasing taxes on unearned income solve the problem of every person in America being one vote away from the government confiscating all of our earned income?
“unearned income”? All income is earned, unless stolen (or taxed
)
Nice discussion. My son asked me what would happen if Ron Paul became president. I said, “it would be horrible initially. We’d see tons of changes.” Then he asked, “and what about after that?” I said, “then we’d finally get all the sand out from under the foundation and rebuild it on bedrock.”
In the states that do not have income tax the other sources of income for government is higher than other states. Things like property taxes are much higher for example. I would love no income tax, but it is not a panacea. In California, we passed Prop 13 in 1976, to reduce or level out property taxes and reduce government spending. It did lower property taxes by setting it to the sales price (1.025%). Commercial property which does not turnover as often has benefited from this change more than the residents. State government keeps expanding despite the change. Until our politicians make a change in their thinking the revenue does not matter.
Kevin – I applaud you for taking on this subject and the abuse of the people who are willing to let government own their income and defend it! Unbelievable! They have no understanding of freedom after being brainwashed by out liberal education system.
Keep Fighting! We can win, maybe not in 2012, but in the near future. America is still great, we have to fight for our freedom every generation. The fight is on.
God Bless America.
I don’t think you even need to go back to 1982 – 1990 outlays were 1.25 Billion (well, there was another 225M off budget, but off-budget spending had a surplus).
I don’t think the US was a second world country in 1990… I don’t remember it that way, anyway… We’d certainly need to cut back the social and defense programs we have currently, but I’d say it’s theoretically possible to get back to those spending levels – it’s just I don’t see the income tax disappearing anytime soon.
I’m just glad it’s not a wealth tax…
NO social security, medicare, medicaid, welfare, unemployment benefits, useless grants, money handed to illegal immigrants, or to poor people who dont want to work to earn money but want to go to college anyway?
What you mean people should be able to take care of themselves?
ROCK ON KEVIN!
I would be in favor of no personal income taxes IF all of these programs were cut and/or sent to the state level. (Assuming the gov’t can actually meet its other obligations with out one).
Income tax is wealth redistribution. I have 2 children, so I usually get back more in taxes than I pay in over the year. What the hell is that? Just because it benefits me doesn’t mean I believe it is right or a responsible use of money. I would be glad to see those deductions go. One should only get back the exact amount they pay in at the most, never a penny more. But if you get it all back, what is the point of the tax in the first place. Its probably much cheaper to scrap the income tax anyway. Mabey even chop the entire IRS.
That being said, Im still not a libertarian, I just believe the government should be more frugal and knock off the hand outs.
I love you.
As far as actually repealing the 16th ammendment, I believe (like you) that the rate for personal income tax should be 0%, and the government should do everything in its power (through responsible spending) to keep it there. However, the 16th ammendment should stay.
I see it like the draft. There is no draft now, but the government reserves the right to institute one if the need arises. However, through responsible recruting and retention programs, one is not needed and should not be needed unless we experience something on the level of WWII.
So it should be with the 16th. Gov’t should keep the right to tax in case its ever needed, but strive to keep it 0% through responsible and sustainable spending of other tax money. No bringing the tax rate back from 0% just because a few senior citizens failed to plan for their own retirement, ect.
I can’t believe that the U.S. government also places a claim on worldwide income — not only income earned within the U.S. This goes above and beyond what other countries do, including “socialist” ones such as Canada.