Now that the opportunity is available, it’s time to correct the biggest Constitutional violation Congress has ever perpetrated; the creation of the Federal Reserve and the income tax. However, there’s the little matter of over 21 trillion dollars that has gone missing from the Federal budget that must be addressed first. If we end the FED before that matter is addressed, what is probably the largest theft from the public treasury in history will go unresolved and unpunished. I therefore propose that before any cutting is done, a detailed audit of the entire Federal bureaucracy must be undertaken. Once that is complete, and the missing money found and, if possible, recovered, it will then be imperative to get rid of the FED and the income tax. Any effort to create long term prosperity and stability will fail unless this is done.
Although I agree with repealing the Federal Reserve Act of 1913 and amendments and the Internal Revenue Code of 1913 and amendments, the 16th amendment can stay.
The Supreme Court ruled that the amendment changed nothing and only restricted the income tax, a power which the Congress had since the beginning in 1788 when the Constitution was ratified, from being removed from the indirect tax category to which it belongs and placed in the direct tax category to which it does not belong (which is what President Lincoln did with his Income Tax Act).
This can easily be seen when the text of the 16th amendment is analyzed.
“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.”
Direct Taxes come from article 1, section 2, clause 3 of the Constitution and in pertinent part read:
"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons. "
How this works is when the United States incurs a debt, such as from borrowing money in times of emergency, once the emergency is past, the total debt (and interest) is calculated as of a date (let’s say 6 months) in the future. If the total debt and interest on that date came to $435,000,435.00, then the debt is divided by the number of members of the House of Representatives (since they too are apportioned in the same way) and a bill is sent to the States to collect and pay by the deadline. A state with 1 Representative would receive a direct tax bill of 1,000,001.00. A State with 10 Representatives would receive a bill for $10,000,010.00, and so on. If the State already had this amount in its treasury, then it could simply pay the bill out of its treasury and be done with it. A State that did not already have the money sitting it its treasury would collect the amount through its taxing powers that exist within the State, and once collected, would pay the tax bill to the US Treasury. The US Treasury would pay off the national debt returning the United States to a state of being debt free. We have only used this provision of the Constitution 3 or 4 times (I forget which) in our entire history and have NEVER used it in the 20th or 21st centuries which is why most people today are unaware of how it works or that it even exists!
Indirect taxes are found in article 1, section 8, clause 1:
“The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;”
An indirect tax is not apportioned to the States like a direct tax is. Instead, it is subject to the rule of uniformity so that no matter where you are in the United States, the tax amount is the same. (A direct tax is different depending on what State you are in, existing in some places, and not others, being more in one State, but lower in others. – NOT uniform).
Looking back at the 16th amendment:
“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.”
We see that it begins “The Congress shall have power to lay and collect taxes…” which is the exact words used for an indirect tax found in article 1, section 8, clause 1.
Further the 16th amendment also goes on to specify that the tax laid and collected is “without apportionment among the several States, and without regard to any census or enumeration.” This is directly opposed to the Direct tax of article 1, section 2 clause 3 and completely in agreement with the indirect tax of article 1, section 8, clause 1 which is without apportionment and there for is naturally without regard to census or enumeration which only becomes relevant when apportioning the debt to be collected. Thus, the 16th amendment is subject to the rule of uniformity and it is true that no matter where you are in the United States, the same tax rates apply given the same conditions, your physical location by State is irrelevant as far as how much is owed.
Thus, the only thing unique about the 16th amendment is “on incomes, from whatever source derived,” and this is specifying WHAT is taxed, which is left open in article 1, section 8, clause 1 as EVERYTHING is possible to be taxed by article 1, section 8, clause 1. Thus, the 16th amendment does not authorize the collection of an income tax, but only requires that a tax on income to be taxed as an indirect tax and not a direct tax and subject to the corresponding, constitutionally established rules.
One observation: article 1, section 2, clause 3 was amended by the 14th amendment, section 2 which read in pertinent part:
"Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed. "
However, the 14th amendment did not include “direct taxes” in its change to how an apportionment should be calculated for representatives. Thus we might be in a situation where representatives and direct taxes are now apportioned differently which is contrary to the Framer’s desire to balance the benefit of having a larger population with a direct detriment of a directly corresponding increased tax burden.
In short, the federal government can directly tax States, but can only indirectly tax citizens.