By the late 1800s working class Americans were demanding their representatives in government levy an income tax on accumulated wealth. This was the era of the “robber barons”—J.P. Morgan, Andrew Carnegie and John D. Rockefeller—men whose virtually untaxed fortunes were growing apace with their influence over national policies, both foreign and domestic.
Back then, the primary sources of revenue for the U.S. government were tariffs and duties on imported goods. Many items, like food and clothing, were taxed upon importation. Since food and clothing are necessary expenses that consume most working class wages, the burden of funding government fell disproportionately on the shoulders of wage earners under the tariff system.
A tax on investment income from property and annual profits from businesses had popular support among wage earners. Congressional Record and newspaper articles of the time show Democrats in Congress kept trying to pass an income tax law specifically intended to bring tax relief to millions of working Americans; the Republicans acted as agents representing the interests of the Rockefellers, et al, who did not want their “incomes” to be taxed.
It is plain to see from the written record that both sides of the aisle understood wages and salaries from labor were not considered taxable as income under the original intent of the 16th Amendment.
By 1913 the Republicans had run out of reasons to block an income tax. That same year the16th Amendment was ratified. Republicans, led by Sen. Nelson Aldrich of Rhode Island, forced the passage of a tax code that benevolently “exempted” the first $4,000 of an individual’s annual wages from income taxation.
It is important to note that the average worker’s wage before WWI was about $500 a year. During WWII, by way of the two-year Victory Tax, most Americans began paying income taxes on their wages. It was a time of heightened patriotism when few people questioned their government. They had forgotten that the definition of “income” did not include wages. Americans were proudly doing “their fair share” to build the land of the free and be a shining example to the rest of the world.
Americans failed to recognize that, by allowing “their fair share” of taxes to be directly deducted from their labors, they were duplicating conditions that contributed to the fall of the Roman Empire. Rep. Williams of New York, in the Fourth Congress (page 1898, Jan.,1797) is quoted in the Annals of Congress as reminding his colleagues “of the annihilation of nations by means of direct taxation.”
He explained that Rome, “in its innocence,” had no “direct taxes.” He said, “Indirect taxes and taxes upon luxuries and spices from the Indies were their [the Romans’] sources of revenue but, as soon as they changed their system to direct taxation, it operated to their ruin; their children were sold as slaves and the Roman Empire fell from its splendor.”
Rep. Williams hoped America would not follow the Roman example. Unfortunately, it has. In 90 years, since passage of the 16th Amendment, America has fallen from its post-WWII prosperity into social, political and economic decline.
The following 14 pages will illustrate how—in just a few generations—direct taxation of people’s wages has helped the most prosperous and free people in history become the most over regulated and indebted nation the world has ever seen.
If we run into such debts as that we must be taxed in our meat and in our drink, in our necessities and our comforts, in our labors and our amusements, ... our people ... must come to labor sixteen hours in the twenty-four, give the earnings of fifteen of these to government, ... and have no time to think, no means to call the mismanagers to account; but to be glad to obtain sustenance by hiring ourselves to rivet their chains on the necks of our fellow sufferers ...((((caption for JP Morgan cartoon:)))) “Congress—Who’s In It and Who Owns It?” 1906 cartoon by Jacob Burck memorializes what Americans at the time knew to be true—that Congress was owned by big business.
And this is the tendency of all human governments; a departure from principle in one instance becomes a precedent for a second, that second for a third, and so on ‘til the bulk of society has been reduced to be mere automatons of misery ...
And the forehorse of this frightful team is public debt; Taxation follows that and, in its train, wretchedness and oppression.
~Thomas Jefferson, letter to Sam Kerchival, 1823
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