“The hardest thing in the world to understand is the income tax.”—Albert Einstein
By Rebekah Rast
Ed Brown was sentenced to 37 years in federal prison in January after refusing to pay federal income taxes.
The story of New Hampshire couple, Ed Brown and his wife, Elaine, received national coverage. The couple insisted it was unlawful for the government to require them to pay income taxes. They were sentenced to 63 months in federal prison for tax evasion after failing to pay more than $1 million in income taxes.
But, according to Ed, they weren’t going anywhere. Ed and Elaine barricaded themselves inside their concrete walls for nine months.
Supporters of the couple would bring by food and ammunition in case the U.S. Marshals decided to raid the home. Ed was ready for a combat-style standoff, but all his preparations weren’t necessary. In October of 2007, U.S. Marshals made it inside the home by posing as supporters of the Browns, and arrested them both.
The government does not take lightly its citizens not paying their taxes.
“As the great American orator Daniel Webster once argued in front of the Supreme Court, ‘An unlimited power to tax involves, necessarily, a power to destroy,’” says Bill Wilson, president of Americans for Limited Government (ALG). “This may be why the IRS is the most feared federal agency of them all.”
This also may be why Ed and Elaine Brown barricaded themselves in their home with a full arsenal of weapons.
The income tax is part of the tax code that is especially touchy. Not only is it complex, but it hits you where it hurts the most — your personal income. How did this tax evolve? How has America’s history complicated and twisted this tax into what it is today?
Believe it or not, America hasn’t always had an income tax. In fact the American people had very little interaction with the federal government as it was the states’ job to monitor the revenues it needed. The federal government relied on donations from state governments.
When the Constitution was adopted in 1789, the Founding Fathers decided that no government could run properly if it had to depend on extra revenue from other governments, so they decided to give the federal government the power to raise taxes. The Constitution gave Congress the ability to “…lay and collect taxes, duties, imposts, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.” (Article 1 Section 8 of the Constitution)
Soon after the new nation was established, citizens started fighting against various taxes they deemed unfair. The Whiskey Rebellion of 1794 started with a group of Pennsylvania farmers who refused to pay the tax on whiskey. Their adamant opposition forced President Washington to send federal troops to end the rebellion. Thus displaying how determined the federal government was to keep in place its revenue laws.
The Civil War brought about more changes to the U.S. Tax Code. At the start of the war, Congress passed the Revenue Act of 1861, which imposed a tax of 3 percent on all incomes higher than $800 a year. From there the tax moved into a tiered system much like today with different levels of income being taxed at different rates.
After the war there wasn’t a need to continue the tax. The income tax was abolished by 1872.
The need for more federal funds didn’t take long. Congress ratified the 16th Amendment by 1913 and introduced a new income tax law as well as the 1040 tax form.
All was going well in America in the 1920s. The economy was strong and the government lowered the income tax rate dramatically. When the stock markets crashed and the Great Depression hit, the government began losing money fast. So, during the time of a broken economy and high unemployment rates, the federal government raised the taxes on the people. What was the result? The federal government had more money at the expense of an even weaker and ever-shrinking economy.
As the government had a continued need for revenue it began implementing new taxes like Social Security and Medicare. It also changed the income tax model to a tax withholding method. Income tax withholdings were used during the Civil War and greatly eased the collection of the tax. As the government moved back to this method, taxpayer’s were no longer aware of how much they were really paying in taxes and it made it easier for the government to hike up the rates in the future.
America now faces an ambiguous, less transparent income tax system. If asked how much you gave the federal government in taxes last year, would you know the answer? Most Americans know what refund they received or how much they owed, but how much was actually paid to the government is often unknown.
What’s more alarming, a report by the Tax Policy Center, based in Washington, D.C., found that for tax year 2009 about 47 percent of U.S. households paid no federal income tax. This is due to the level of income and available tax preferences.
You begin to wonder if this is the system the Founding Fathers were hoping for when they gave Congress the right to raise taxes.
The income tax deserves a closer look. With more changes to the tax system set to take effect next year it’s time to learn who is most affected by this tax and how it might change. After all, no one takes taxes more seriously than the federal government. Ed Brown can attest to that.
Rebekah Rast is the national correspondent to Americans for Limited Government (ALG) News Bureau.
