What we now know as the Internal Revenue Service (IRS) began as an act by President Lincoln and Congress in 1862. It created the position of the commissioner of Internal Revenue and enacted an income tax to pay for the expenses of the Civil War (Revenue Act of 1862). Initial rates were around 3% for incomes exceeding $800, which allowed for the majority of the working populace to be exempt. However, by 1864, rates had risen to 5% for low-income families, and up to 10% for anyone making $10,000 or more. By the end of the war, more than 10% of Union families were paying some sort of federal income tax.
In 1872, Congress allowed the temporary wartime tax to expire and federal income taxes didn’t become an issue again until 1894. The case of Pollock v. Farmer’s Loan & Trust Co. was a five-to-four landmark decision by the Supreme Court that the Income Tax Act of 1894 was unconstitutional on the grounds that it was a direct tax. Under the Constitution at that time, direct taxes must be apportioned among the states based on population. Since the act allowed for Congress to distribute the funds without apportionment, it was deemed unconstitutional.
Early in the 20th century, there was a populist movement for tax reform that climaxed on February 3, 1913 with the ratification of the Sixteenth Amendment to the United States Constitution:
The Congress shall have 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.
This is one of the worst blemishes on the United States Constitution. It holds no regard for individual liberty and exists only to further the existence of the State, by whatever means necessary. It fundamentally changed the entire nation, nullifying a very important part of the Constitution. Forty-two states ratified the amendment. I can happily say that Florida didn’t even consider the issue.
The Bureau of Internal Revenue was founded once again. In the first year of its new existence, the BIR doubled its workforce, creating a whole new system of collection and organization. The newly revitalized institution was slowly becoming a standing army of tax collectors.
The first Form 1040 appeared that same year after Congress levied a 1% tax on net incomes above $6,000, and a 6%-10% progressive tax on incomes exceeding $500,000. However, five years later, the top bracket was being taxed up to 77% in order to finance our efforts in WWI. Percentages dropped sharply during the 1920’s, and remained low until the Great Depression.
In less than a century, what was basically a tax revolution seems commonplace to most Americans. Filing an annual income tax return has become an accepted must do. And you should file for a return, not because the IRS will get you, but because that money belongs to you anyway. The problem is that it shouldn’t have been taken from you in the first place.
I have a buddy who lives in Brooklyn, New York. He paid $2700 total in NY State and NYC income taxes for the fiscal year 2010. He only got $135 on his return. If he were investing $2700 into private stocks and received the same sort of return, I can bet he would fire his broker, withdraw his assets, and invest elsewhere.
The problem, though, is that you can’t fire the federal government, and you can’t opt out of paying taxes, either. The money Congress appropriates each year for its budget is your money. For too long they’ve been making mal-investments resulting in bad returns. The Chicago Climate Exchange is a good example of this. It was supposed to be a $10 trillion a year industry. Now it’s bankrupt.
In the 1950’s the BIR changed its name to the “Internal Revenue Service” to emphasize the “service aspect of their work”, even though its essential function remained the same. This is propaganda at its finest.
One of my heroes, Karl Hess, practically had his life ruined by the Internal Revenue Service in the 1960’s. He was the principle speechwriter for Barry Goldwater in the ’64 presidential election. Goldwater lost to Lyndon B. Johnson by a landslide. Shortly thereafter, Johnson had the IRS audit Hess. They charged him with tax resistance, confiscated nearly all of his property, and placed a 100% lien on all of his future earnings. You call that “service”?
When Hess questioned an IRS collector about a certain deduction that didn’t seem right, the agent told him, “it doesn’t matter if it’s right, what matters is the law.”
Feeling that the IRS would have a good sense of what is right and what is law, Hess sent them a copy of the Declaration of Independence with a letter attached telling them he would never pay taxes again. The IRS responded by revoking his ability to use American money. When he told them that he wouldn’t be able to feed himself if he couldn’t use money, they replied, “That’s not our problem.”
Hess became a heavy-duty welder, using only cash and bartering for food and supplies. He went on to become a prominent practitioner of “appropriate technology” and has been a major influence on libertarian thought over the last fifty years. He died in 1994…an anarchist.
If 10 million Americans had joined Hess in his anti-tax crusade, it would have transformed, perhaps even abolished the way we handle taxes in this country. I suggest we do exactly that.
Abolish the Internal Revenue Service.
The IRS is the single-most authoritarian institution in the country. In 1998, under Clinton’s watch, the Taxpayer Bill of Rights III was passed. It’s hardly a step toward more liberty, though. This law shifts the “burden of proof” from the taxpayer to the IRS. This means the IRS can legally seize assets and enforce liens without obtaining judgment in court. It allows for those in power to silence their political enemies by physical coercion. THIS IS TYRANNY.
Economist Murray Rothbard defines a State as two things: a) an entity that acquires its revenue from the general population by physical coercion, and b) an entity who has a monopoly on the provisions for defense and protection.
The IRS is the physical arm of the state—the hand in your pocket—that takes what does not belong to it, and turns it over to congress for appropriation without apportionment among the many states. And if you don’t allow their hands in your pockets, they’ll be around your neck.
We are at a critical point in history. Our children and grandchildren will ask us, decades from now, where we were and what we did. Will we be the silent observers? Or will we lead a charge for independence? Will we be able to tell them stories of how we actually dismantled the system, and that we did it without throwing bricks or turning over police vehicles, that we killed the beast from within, using its weaknesses against it, that the revolution was not a lie?