Your Money
or Your Life
Your Money
or Your Life
Why We Must Abolish the Income Tax
Sheldon Richman
ISBN 978-1-890687-11-3
Copyright © 1999
All rights reserved. No portion of this book may be reproduced without written permission from the publisher except by a reviewer, who may quote brief passages in connection with a review.
The Future of Freedom Foundation 11350 Random Hills Road, Suite 800 Fairfax, Virginia 22030
Library of Congress Catalog Card Number: 97-060308
Printed in the United States of America
For Jennifer, Emily, and Benjamin
May they know the freedom of an income-tax-free world.
Contents
Acknowledgments
Preface by Jacob G. Hornberger
Foreword by Walter E. Williams
Introduction by Richard M. Ebeling
Chapter 1: The Permanent War
Chapter 2: The Immorality of the Income Tax
Chapter 3: Who’s the Master? Who’s the Servant?
Chapter 4: The Income Tax Makes You Poorer
Chapter 5: How We Got the Income Tax
Chapter 6: Let’s Abolish the Income Tax
Afterword
Epilogue: Beware Income-Tax Casuistry (2013)
About the Author
The Future of Freedom Foundation
Index
Acknowledgments
Many people helped me see this book through to completion. First and foremost, Jacob G. Hornberger, president of The Future of Freedom Foundation, was a unique source of moral and material support, to whom I owe a great debt. As I’ve said on another occasion, but for him, this book would not exist.
My friends Jeffrey Rogers Hummel and Roy E. Cordato read an early, rough manuscript and gave me excellent suggestions.
Patrick Fleenor of the Tax Foundation, Dean Stansel of the Cato Institute, David Keating and Peter Sepp of the National Taxpayers Union, and Victor Krohn of Citizens for an Alternative Tax System graciously shared data and other information.
Elaine Hawley, librarian at the Institute for Humane Studies’ Harper Library, was as hospitable as any researcher could hope.
Mark Brady, formerly of IHS, and Leonard Liggio of the Atlas Economic Research Foundation helped me sort out sundry issues through provocative conversations.
Chapter 5 on the history of the income tax is based on a paper of mine written in 1990 for a Ludwig von Mises Institute conference on taxation.
Thanks, finally, to Ronald Neff for his superb copyediting and to Paige Moore for her skill at turning the manuscript into a book.
Naturally, responsibility for any errors is mine alone.
Preface
Our American ancestors created the most unusual society in history. For more than a century, Americans rejected Social Security, Medicare, Medicaid, welfare, subsidies, public schooling, trade restrictions, economic regulations, immigration controls, drug wars, and other aspects of the paternalistic welfare state that pervaded other parts of the world. This is what it once meant to be an American — to live one’s life the way one chose without fear of being punished, restricted, or ordered by his government to do otherwise.
Equally important, people were free to accumulate unlimited amounts of wealth. For when they established the federal government with the Constitution in 1787, Americans deliberately refused to grant their government the power to levy taxes on their income. Throughout the nineteenth century, Jens of thousands of people went from rags to riches. For the first time in history, there was absolutely nothing government officials could do about it.
The result of this unusual way of life, despite the tragic exception of slavery, was the greatest amount of freedom that man had ever seen. No one was forced to care for his neighbor. No one was punished for ingesting harmful substances. No one was compelled to send his child to school. No one was coerced into honoring his mother and father. Each person was free to make these decisions on his own.
When government had no power to take away people’s income, not even to fight poverty, the result was the wealthiest society ever. And this occurred despite the massive numbers of penniless immigrants who were flooding America’s shores, escaping the European lands of government guarantees against poverty to come to the land where no such guarantees existed.
But there was another unusual result. When people were free to accumulate wealth, the result was also the most charitable period that mankind had ever seen. When the Frenchman Alexis de Tocqueville visited America in the nineteenth century, he marveled at all of the voluntary charitable activities in which Americans were involved. Without being forced by government officials, Americans were voluntarily building churches, museums, opera houses, libraries, and universities.
Unfortunately, the American people of the twentieth century have abandoned the principles on which America was founded. They now embrace the way of life that people around the world have endorsed throughout history — a way of life in which government takes care of them by controlling them and their income. People in Cuba, North Korea, China, Russia, and the United States now share a joint commitment to such things as Social Security, Medicare, Medicaid, public housing, public schooling, welfare, trade and immigration controls, economic regulations and, of course, the taxes that pay for the paternalistic welfare state.
The Sixteenth Amendment to the U.S. Constitution fundamentally altered the relationship of the American citizen with his government. Prior to the amendment, it was understood that a person’s income belonged to him rather than to the state. Today, the understanding is the opposite — every person’s income belongs to the nation (“national income”) and the government decides how much of a percentage each person shall be entitled to keep.
Moreover, Americans today have little confidence in themselves. They honestly believe that, unlike their ancestors, they must be forced by the political elite to be caring and compassionate with their friends, families, and neighbors. The thought of dismantling the socialistic welfare state, rather than simply reforming it, is terrifying to the average American.
This book is an attempt to recapture the principles on which this great nation was founded — the principles of individual liberty, private property, free markets, and freedom of choice. It is dedicated to the proposition that every individual has the inherent, inalienable right to be free, which includes the fundamental right to accumulate unlimited amounts of wealth in the marketplace and to decide what to do with that wealth. It is an attempt to encourage Americans to reflect upon and reevaluate their relationship to their government and to themselves. It is devoted to a recapturing of the self-esteem, the self-reliance, and the sense of voluntary charity that characterized our ancestors.
There are those who claim that Americans are doomed to suffer income taxation forever. But they are wrong. Ideas have consequences. They motivate people to act. If one generation could bring the Sixteenth Amendment into existence, a new generation has the power and the right to repeal it.
The twentieth century has been the century of socialism and the welfare state. Unfortunately, despite all of the misery that this dysfunctional way of life has caused, people around the world cannot abandon their addiction to it. It is up to the American people to lead the world out of this socialistic, paternalistic morass.
In order to do so, Americans must do more than simply repeal the Sixteenth Amendment. In order to lead the world to freedom, Americans must also reject the paternalistic welfare-state programs and such domestic wars as the war on poverty and the war on drugs that have scarred our society for the past several decades. When that day comes — and
it ultimately will — Americans will recapture their destiny and lead the world to the highest reaches of freedom ever seen by man.
— Jacob G. Hornberger
Founder and President
The Future of Freedom Foundation
Foreword
Your Money or Your Life sounds like a threat from a highwayman, but it is not; it is the perennial threat offered, through its Internal Revenue Service agents, by the United States Congress. Sheldon Richman does a yeoman’s job in showing that. He shepherds the reader through the twisted history of lies and deceit that preceded and followed the passage of the Sixteenth Amendment and hence the implementation of direct taxation that the Framers of the Constitution feared so much. Most tax critics focus their criticism of our tax code on its wastefulness, complexity, and social engineering, and on the size of the government take. While their criticism has unquestionable merit, Richman rightly and adroitly focuses on the more important moral issues the income tax raises and how it stands the Constitution’s Framers’ vision of a just society on its head.
One does not have to do a lot of reading to reach the conclusion that the Framers saw government as the most ruthless enemy of mankind, as exemplified by this small sample of their admonitions and warnings:
“We must bind the powers of the state with the chains of the Constitution.”
Thomas Jefferson
“We must confine ourselves to the powers described in the Constitution, and the moment we pass it, we take an arbitrary stride towards a despotic Government.”
James Jackson of the First Congress
“All men having power ought to be distrusted to a certain degree.”
James Madison in The Federalist
“We still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping at the spoil of the multitude. Invention is continually exercised to furnish new pretenses for revenue and taxation. It watches prosperity as its prey and permits none to escape without a tribute.”
Thomas Paine
“The true theory of our Constitution is surely the wisest and best … [for] when all government … shall be drawn to Washington as the centre of all power, it will render powerless the checks provided of one government on another, and will become as … oppressive as the government from which we separated.”
Thomas Jefferson
“You have rights antecedent to all earthly governments; rights that cannot be repealed or restrained by human laws; rights derived from the Great Legislator of the Universe.”
John Adams
The Framers recognized that government is a necessary evil, so they sought to limit government power to its legitimate functions by enumerating the powers of Congress. That enumeration is found in Article I, Section 8 of our Constitution. They include the power to lay and collect taxes to support armies, provide and maintain a navy, declare war, establish post offices and post roads, and a few other activities. No matter how carefully one searches the Constitution, he cannot find authority for four-fifths or more of today’s federal expenditures, such as crop subsidies, business bailouts, Amtrak, welfare payments, Social Security, Medicare, ad nauseam. Furthermore, the Constitution gives no grant of authority for Congress to create the departments of Education, Commerce, or Health and Human Services, the National Endowment for the Arts, or the hundreds of other federal agencies.
Virtually all of today’s federal activities boil down to either taking the property that rightfully belongs to one American and giving it to another American to whom it does not belong or granting one American a special privilege denied another American. Those activities are nothing less than the immoral use of government’s brutal force to commit legalized theft and plunder, hence the aptness of Richman’s title, Your Money or Your Life.
Some might consider Richman’s title to be hyperbole, but it accurately describes what is at stake. We can readily see this by asking, What is the endgame of the following scenario? Suppose an American told the U.S. Congress, “I am an emancipated adult. I wish to be left alone to tend to my own retirement needs. If I fail to do so adequately, let me either depend on charity or suffer the consequences; however, I refuse to pay into the government’s Social Security retirement program.” If that person refused to fork over a part of his earnings as Social Security “contributions,” the IRS would fine him. If that person rightfully concluded that he has not harmed or initiated violence against another and therefore refused to pay an unjust fine, he would be threatened with property confiscation or imprisonment. Suppose he then decided to use his natural or God-given rights to defend both his physical property against confiscation and his person against aggression? More than likely, he would suffer death at the hands of the U.S. government. The moral question Americans ought to ask is whether they can produce a moral argument that justifies a citizen’s being subject to death by his government when that citizen has initiated violence against no one and simply wants to privately care for his own retirement needs? I know of no standard of morality that yields an affirmative answer.
Richman does an excellent job of documenting the political struggle that produced the Sixteenth Amendment, open season on our earnings, and the level of government control over its citizens unimaginable even by kings and tyrants. But Congress was not alone in producing today’s runaway government. It was aided and abetted by a corrupt and derelict U.S. Supreme Court contemptuous of our Constitution. A sample of that contempt is the landmark 1936 decision in which the Supreme Court all but nullified Article I, Section 8 of the Constitution when it ruled that the New Deal Agriculture Adjustment Act was constitutional (U.S. v. Butler, 297 U.S. 65, 66 [1936]). The Court wrote, “The power of Congress to authorize appropriations of public money for public purposes is not limited by the direct grants of legislative power found in the Constitution.” The Court essentially told Congress that it does not matter what the Constitution says. It does not matter what limits the Constitution places on government; they have the right to do as they please and engage in whatever activities they please. The Court’s decision helps to explain how the federal government came to spend more than 25 percent of our GNP, compared with the 4 percent expenditure (except during wars) from the birth of our nation to the 1920s.
The current income tax code is complicated, abusive, and invasive and is long overdue for elimination. While the nation debates this issue, it will serve us well to recognize that if the federal government seeks to collect $1,600,000,000,000 of the people’s earnings, it must establish an oppressive system of collection, whether under the current code, a flat tax, or a national sales tax.
As Sheldon Richman argues, any long-term solution to the problems and threats to liberty created by the federal government must address itself to the moral and constitutional issues associated with the activities of the U.S. Congress, the White House, and rulings of the U.S. Supreme Court.
— Walter E. Williams
John M. Olin Distinguished
Professor of Economics and
Chairman of the Economics Department
George Mason University, Fairfax, Virginia
Introduction
The singular feature of the twentieth century has been the dominance of an anticapitalist mentality. Accumulated private wealth has been considered the result of greed, exploitation, and misrepresentation. How else could some people have acquired personal riches other than at the expense of others? At the same time, significant inequalities in income and wealth have been considered unfair and immoral. What equality of opportunity can exist in society when some start out with greater financial resources with which to play in the game of life?
Through most of human history, wealth often was acquired through force, plunder, and exploitation. Marauding bands of cutthroats and thieves would descend upon villages and towns, looting the meager wealth and food supplies of the hapless victims. Kings and princes and bloodthirsty adventurers would conquer various regions and territories and impose their will upon th
e occupants of the land; tribute, compulsory labor, and onerous taxes and tithes would be demanded under threat of terror, torture, and death. Regulations, controls, and restrictions would be established over the economic activities of the poor residents of these areas by those who made themselves lords and masters over their violently acquired domains. Caste and class structures were established that guaranteed that the conquerors and their descendants were assured permanent privileges at the expense of those of lower rank who were made to work and produce for a politically protected elite.
This was the social environment in which countless generations of human beings throughout the world have worked and lived out their lives. Only during the last 300 years did this social condition begin to change, with its epicenter in a revolution of ideas in Europe and North America. Scholars, thinkers, and philosophers began to articulate a notion of the rights of man. They rejected the ancient Greek idea that some men were naturally meant to be masters while others were born to be slaves. They secularized the Christian idea that all men are equal in the eyes of God. This new notion of the rights of man reached its clearest formulation in those stirring words of the American Declaration of Independence: “We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness — That to secure these Rights, Governments are instituted among Men, deriving their just Powers from the Consent of the Governed.”
The same year that the American Founding Fathers articulated the basis for the fundamental and universal rights of every human being, the Scottish moral philosopher Adam Smith published The Wealth of Nations, in which he explained the idea of a “system of natural liberty.” Once all forms of government regulation, control, and privilege were done away with, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient — the duty of superintending the industry of private people and of directing it towards the employments most suitable to the interest of the society.
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