Aug11,2011 IncomeTax&TheAmericanWarDebt IncometaxinAmericawasfirsttriedduringtherevolutionaryperiodandthenagainaftertheCivil Warbrokeoutwell,theyhadtopaythetroopssomehow.Thattaxationdidnotlastlongandwas quicklyrepealed.Congresswasanexclusiveclubforwealthylandownersmostlyandyouhaveto wonderwhyCongressgentlemenofthetimerepealedincometaxsoquickly.Itwasnotuntil1894that Congresscreatedthefirstpeacetimeincometax.Theratewas2%onincomesover$4,000peryear, whichmeantfewerthan10%ofhouseholdswouldpayany.Inshort,thetaxonlyappliedtothevery wealthyas$4,000.Backthenthatwastheequivalenttooveramilliondollarsalarynow. IfCongressenactedasimilartaxnowtopayforthewaranadditionalflat(nodeduction)2%forthe wealthiestAmericansthenationaldebtwouldgodownbyhalfwithin10years.Thinkthatistoolittle? Considerthis,thedealWashingtonisbrokeringwiththemostdividedandcontentiouscommitteeever formedwillcutthedeficitbylessthanaquarterofthat.IllbetifyouaskedthewealthiestAmericansif theywerewillingtorightthisshipforameasly2%oftheirannualincome,theywouldagree.Infact, severalalreadyhavelikeWarrenBuffettandBillGates,Sr.

Oneoftheproblemsweallhavedealingwithincometaxisthatwedonotremembersomeofthe argumentsmadetopermanentlyintroduceitinthefirstplace.Soletscastourmindsbacktothepre 1894dayswhenrevenueandspendablegovernmentfundswereraisedintwoways:ImportTariffsand loansfromthewealthy.Importtariffswerecharged(levied)oneveryitembeingimportedintotheUSA. Thatmeantthattheimporterhadtopaythegovernmentexciseofficerataxonthevalueofthegoods whenimported.Anditcouldbemonthsandmonthsbeforehegotanyreturnonhisinvestmentbuying thegoodsandpayingforshippingandexcisetax.Importdutyeasilydoublestherealcostofimported goods.AnditwasnotjustataxforgoodsimportedintotheUSAbecausestatebystateimporttaxes, tariffs,werealsolevied.Soa$1itemmadeinNewYorkcouldcostsomeoneinKentucky$3bythetime youaddedintaxes,transportationandbankingfinancing. SoCongress,inanefforttochangetherevenuestream,tohelpreducethecostofgoodsforthe averagecitizen,startedtoreduceimporttariffs,dropinterstateexcisedutyand,instead,arguedthata smallincometaxwouldbemoredemocratic.ThewealthiestAmericansopposedthenotionofincome tax(afteralltheywerethesellersoftheseimportedgoodsatalargerprofit)andproclaimedincome taxeswereimmoralandunconstitutional(whichittechnicallyis).TheSupremeCourtgotaroundthatby declaringincometaxasadifferentsortofexcisetax(whichitisstillcalledtoday).

ButtherealreasonthewealthiestAmericansopposedincometaxwasthatittookawaytheir leverageoverthegovernment.Ifyouthinklobbyistsarepernicioustoday,imaginewhatGeorge WashingtonallthewaytoGroverClevelandhadtodealwithwhen95%ofallrevenueforthe governmentwasbypatronageorimportdutiescontrolledbythewealthy.Originally,theContinental CongresslearnedafinancingtrickfromtheBritishlordswhostartedtheBankofEngland.No,nota publicinstitution,butthewealthiestcitizenswhocreatedabanktoloanthegovernmentmoneyathigh interestratesand,insodoing,alsocontrolledthecurrency.Inshort,theyruledthecountry.Ittook Britain250yearstowrestlecontrolawayfromthesepatronsandruntheBankofEnglandthemselves asademocraticgovernmentshould. InAmerica,whendiscussionsstartedoverincometaxinthelate1800s,someofCongresswerereally tryingtoredemocratizethecountry,bygivingthefinancialpowerovertoeveryone,notjustthe wealthywhofinancedwars,roadsandthecivilserviceemployees.Bytaxingeveryonefairly,therecould benobullyvoiceinCongress.Well,itworkedforawhile,untilthecorporationsexercisedtheirmightat electiontime.Thislastelection,78%ofallfundsraisedandspentbyObamatogetelectedweresmaller, privatedonations.WhenBushwaselected,85%offundswerefromcorporateorwealthydonors.And thosedivisionsareinplaceforanotherroundofbombastfrombothsidesnextyear.Butbecareful, evenifyoufeelapathetic,thisnextelectionwillbeaboutavoidingthepersonyoudonotwantinthe WhiteHouse. Meantime,thepublichasforgottentheimportanceofincometaxthereisnogovernmentboss, youaretheboss,youwritethecheck,youpaythesalaries.Ourcountrystartedoffthewrongway, allowinggovernmenttobecontrolledandrunundertheinfluenceofaminority.Tobefair,thoseearly benefactorswere,onthewhole,interestedinthebenefitforallAmericans.Butovertheyears,such powercorrupteduntiltheirfinancialpowerbasehadtobeeroded(incometax).Fornowthepoweris withyou,ifyouwillexerciseit.