The ‘Unchecked Power’ to Tax

Should government be allowed to tax everything? Should elected officials have the power and the latitude to tax every transaction, every activity, every nonactivity, and every single little thing in our brief little lives?

As it is, government already taxes income, production, consumption, ownership, death, and sin. And if they wanted to they could tax “being”; not being itself, as in Being, but particularized being. It’s called capitation, whereby one is taxed for existing, for being here. This “metaphysical tax,” capitation, is even provided for in the original Constitution, see Article 1. Section 9. Paragraph 4.

The reason we don’t have a capitation is because it couldn’t raise much money. With a capitation, which is a head tax, everyone would be taxed the same amount, (except, of course, for those Americans with more than one head). Therefore, under a capitation the evil One Percenters would have the same tax bills as would hobos, bag ladies, and Occupy Wall Street grunge types.

During the debate over ObamaCare, some claimed that ObamaCare’s “individual mandate” was triggered by the individual’s mere existence, i.e. his being. If so, the mandate would be a capitation, and everyone would be required to pay the same amount of tax. Such a tax would be beyond the means of our hobos and bag ladies, and the feds would have a bunch of tax outlaws on their hands. So the drafters made the trigger out of something other than one’s existence: i.e. whether one has an individual income tax liability. That way the feds wouldn’t have a bunch of tax scofflaws to prosecute. And, more importantly, they could tax at different rates. But this is also disturbing because even though they’re not taxing one’s existence, they’re levying a new tax precisely because one owes an entirely unrelated old tax. You see, government taxes everything.

On January 25, The Weekly Standard ran “Unchecked Power” by Eric Felton. It’s about the continuing use of taxes to regulate: “The tax code is complicated not just because generations of rent-seekers have manipulated it for their advantage but because taxation has become an all-purpose method of regulation, one that is virtually preapproved by the courts.”

Early in his article, Felton examines the two big ObamaCare cases and what they mean for further concentration of power in the federal government. These cases illustrate how “the tax code can be used to sidestep the Constitution's restraints on Congress.” In NFIB v. Sebelius, the Court ratified an “unchecked power” to tax; Chief Justice Roberts “wasn’t worried, it seems, about opening a vast domain of congressional power by allowing Washington to tax the infinite number of things that people don’t do.”

And in King v. Burwell, Felton quotes Justice Kennedy during oral arguments: “It seems to me a drastic step for us to say that the department of Internal Revenue and its director can make this call one way or the other when there are -- what? -- billions of dollars of subsidies involved here.” Felton opines:

Obamacare’s success before the Supreme Court will encourage future legislators to exploit the same dangerous loophole: the legal principle that just about any regulation can be justified if it comes packaged as a tax. Which makes Obamacare another sort of case as well -- a case for radically reforming the tax code.

Hear, hear! But just as regulations can be dressed up as taxes, taxes can be disguised as something other than taxes. This may be a minority opinion, but one of the problems with Roberts’ NFIB decision is not that he created a tax where none had existed, but that he failed to recognize the tax that was already right there in the law: the mandate to buy health insurance. Yes, insurance premiums are paid to private companies, but in ObamaCare the payment of premiums is required by the government in furtherance of a government objective. That seems like a tax. So Roberts legislated from the bench, and rewrote the law.

On July 6, 2012, shortly after the decision in NFIB was handed down, The Wall Street Journal ran “A Short History of Congress's Power to Tax,” a short opinion piece by historian Paul Moreno. It doesn’t seem to be still available at the Journal, nonetheless I found it here. Concerning ObamaCare’s individual mandate, Moreno writes that to “any sentient adult, it looks like a ‘capitation’ or head tax,” and he laments that the Court’s dissenters didn’t explore that point. Moreno covers some of the same ground as Felton, including the same court cases. And concerning NFIB: “Justice Roberts has confirmed that there are no limits to regulatory taxation as long as the revenue is deposited in the U.S. Treasury.”

But what if Roberts had found that the mandate to buy health insurance was indeed a tax? That wouldn’t be any more incoherent than finding that the penalty is a tax. If government can define anything as a tax, then the mandated payment of insurance premiums can be a tax, too.

From the standpoint of law, language, and logic, the rulings in NFIB and King aren’t a total disaster, but they’ll suffice until the total disaster rolls in. The big reason to repeal Obamacare is not just that it is awful law and economics, but that the Court ratified it with very bad decisions, creating very sobering precedents. Toward the end, Felton writes (italics added):

Presidential candidates making the case for a simplified tax code, as many in the Republican field have been doing, should look beyond arguments about fairness and growth. Important as those issues may be, the more fundamental question is whether there can be any effective limits on federal power. The courts aren't about to restrain lawmakers from regulating through the tax code.

And that is precisely why Americans needs to amend the Constitution to limit, i.e. to check, the government’s power to tax. Given the deluge of regulations that operate as taxes, one provision of such an amendment would be to put a limit on how much of an earner’s income can be taken by government. Let progressive Democrats come out against such an amendment and say that there shouldn’t be any limits on how much of one’s income government can take.

Felton explores an aspect of taxation that many busy Americans might not be aware of. He does a fine job of tracing the history of using taxes to regulate, examining Supreme Court cases going back to the 19th Century. Did you know that rent seekers in the dairy industry sought regulatory taxes to try and squash the oleomargarine industry? If you care about taxes, I think you’ll find Mr. Felton’s article well worth your time; it’s quite readable, (and he even invokes the venerable Kinky Friedman.)

Government may have taken a pass for now on taxing our being, but our tax system can make one wonder just how free we Americans really are.

Jon N. Hall is a programmer/analyst from Kansas City. 

Should government be allowed to tax everything? Should elected officials have the power and the latitude to tax every transaction, every activity, every nonactivity, and every single little thing in our brief little lives?

As it is, government already taxes income, production, consumption, ownership, death, and sin. And if they wanted to they could tax “being”; not being itself, as in Being, but particularized being. It’s called capitation, whereby one is taxed for existing, for being here. This “metaphysical tax,” capitation, is even provided for in the original Constitution, see Article 1. Section 9. Paragraph 4.

The reason we don’t have a capitation is because it couldn’t raise much money. With a capitation, which is a head tax, everyone would be taxed the same amount, (except, of course, for those Americans with more than one head). Therefore, under a capitation the evil One Percenters would have the same tax bills as would hobos, bag ladies, and Occupy Wall Street grunge types.

During the debate over ObamaCare, some claimed that ObamaCare’s “individual mandate” was triggered by the individual’s mere existence, i.e. his being. If so, the mandate would be a capitation, and everyone would be required to pay the same amount of tax. Such a tax would be beyond the means of our hobos and bag ladies, and the feds would have a bunch of tax outlaws on their hands. So the drafters made the trigger out of something other than one’s existence: i.e. whether one has an individual income tax liability. That way the feds wouldn’t have a bunch of tax scofflaws to prosecute. And, more importantly, they could tax at different rates. But this is also disturbing because even though they’re not taxing one’s existence, they’re levying a new tax precisely because one owes an entirely unrelated old tax. You see, government taxes everything.

On January 25, The Weekly Standard ran “Unchecked Power” by Eric Felton. It’s about the continuing use of taxes to regulate: “The tax code is complicated not just because generations of rent-seekers have manipulated it for their advantage but because taxation has become an all-purpose method of regulation, one that is virtually preapproved by the courts.”

Early in his article, Felton examines the two big ObamaCare cases and what they mean for further concentration of power in the federal government. These cases illustrate how “the tax code can be used to sidestep the Constitution's restraints on Congress.” In NFIB v. Sebelius, the Court ratified an “unchecked power” to tax; Chief Justice Roberts “wasn’t worried, it seems, about opening a vast domain of congressional power by allowing Washington to tax the infinite number of things that people don’t do.”

And in King v. Burwell, Felton quotes Justice Kennedy during oral arguments: “It seems to me a drastic step for us to say that the department of Internal Revenue and its director can make this call one way or the other when there are -- what? -- billions of dollars of subsidies involved here.” Felton opines:

Obamacare’s success before the Supreme Court will encourage future legislators to exploit the same dangerous loophole: the legal principle that just about any regulation can be justified if it comes packaged as a tax. Which makes Obamacare another sort of case as well -- a case for radically reforming the tax code.

Hear, hear! But just as regulations can be dressed up as taxes, taxes can be disguised as something other than taxes. This may be a minority opinion, but one of the problems with Roberts’ NFIB decision is not that he created a tax where none had existed, but that he failed to recognize the tax that was already right there in the law: the mandate to buy health insurance. Yes, insurance premiums are paid to private companies, but in ObamaCare the payment of premiums is required by the government in furtherance of a government objective. That seems like a tax. So Roberts legislated from the bench, and rewrote the law.

On July 6, 2012, shortly after the decision in NFIB was handed down, The Wall Street Journal ran “A Short History of Congress's Power to Tax,” a short opinion piece by historian Paul Moreno. It doesn’t seem to be still available at the Journal, nonetheless I found it here. Concerning ObamaCare’s individual mandate, Moreno writes that to “any sentient adult, it looks like a ‘capitation’ or head tax,” and he laments that the Court’s dissenters didn’t explore that point. Moreno covers some of the same ground as Felton, including the same court cases. And concerning NFIB: “Justice Roberts has confirmed that there are no limits to regulatory taxation as long as the revenue is deposited in the U.S. Treasury.”

But what if Roberts had found that the mandate to buy health insurance was indeed a tax? That wouldn’t be any more incoherent than finding that the penalty is a tax. If government can define anything as a tax, then the mandated payment of insurance premiums can be a tax, too.

From the standpoint of law, language, and logic, the rulings in NFIB and King aren’t a total disaster, but they’ll suffice until the total disaster rolls in. The big reason to repeal Obamacare is not just that it is awful law and economics, but that the Court ratified it with very bad decisions, creating very sobering precedents. Toward the end, Felton writes (italics added):

Presidential candidates making the case for a simplified tax code, as many in the Republican field have been doing, should look beyond arguments about fairness and growth. Important as those issues may be, the more fundamental question is whether there can be any effective limits on federal power. The courts aren't about to restrain lawmakers from regulating through the tax code.

And that is precisely why Americans needs to amend the Constitution to limit, i.e. to check, the government’s power to tax. Given the deluge of regulations that operate as taxes, one provision of such an amendment would be to put a limit on how much of an earner’s income can be taken by government. Let progressive Democrats come out against such an amendment and say that there shouldn’t be any limits on how much of one’s income government can take.

Felton explores an aspect of taxation that many busy Americans might not be aware of. He does a fine job of tracing the history of using taxes to regulate, examining Supreme Court cases going back to the 19th Century. Did you know that rent seekers in the dairy industry sought regulatory taxes to try and squash the oleomargarine industry? If you care about taxes, I think you’ll find Mr. Felton’s article well worth your time; it’s quite readable, (and he even invokes the venerable Kinky Friedman.)

Government may have taken a pass for now on taxing our being, but our tax system can make one wonder just how free we Americans really are.

Jon N. Hall is a programmer/analyst from Kansas City.