A Very Brief History of Taxation in America

declaration-foundersBy Susan Boskey

“100% of what is collected is absorbed solely by interest on the Federal Debt … all individual income tax revenues are gone before one nickel is spent on the services taxpayers expect from government.” ~The Grace Commission Report, 1984

As April 15 nears…thought you would find this research on taxation in America timely if not interesting.

No one living before the Constitution of 1787 could have believed the seven ways to Sunday Americans are now taxed. Under the Declaration of Independence and the first American constitution of 1777, The Articles of Confederation and Perpetual Union, association among the confederate states and a state’s interaction with federal authorities was 100% voluntary.

Though paying taxes was a voluntary act, the federal legislature (never referred to as government), did have legitimate operating expenses, and depended on property taxes collected from and given by the states voluntarily in varying amounts. It was this inconsistent funding that historians thereafter have considered the deal-breaker issue for what has been called the “failure” of this first American union.

A Second Constitution Provides New Powers of Taxation

The untold rest of the story? The Framers of the U.S. Constitution of 1787 seriously wanted centralized authority which was non-existent under The Articles. Far from being commoners, the Framers of the 1787 U.S Constitution were either landed gentry of prominent families, or had risen to the strata of aristocratic American society due to intelligence, education and intent, as did Benjamin Franklin, the tenth son of a soap maker. Make no mistake; these men gleaned knowledge about governance and taxation from the British Crown and the Church of England’s system of tithing. The U.S. Government came into existence with the establishment of the U.S. Constitution of 1787.

Not long thereafter, in 1791, Alexander Hamilton lobbied Congress. He wanted an excise tax to accelerate the payment of national debt incurred during the American Revolution. Also known as the Act of March 3, 1791, this tax law enforced government’s new ability to compel performance (force and the power of distraint giving authority to seize personal property for payment.) Unaccustomed to this new form of government and laws of the U.S. Constitution, some of the earliest Americans took offense. Hamilton’s excise tax incited them to rebel in the 1794 Western Pennsylvania Whiskey Rebellion. An excise tax laid on the manufacture of alcohol had not lawfully applied to them. Those who then lived in Pennsylvania, an original state established under The Articles, were called “free inhabitants” and lawfully remained so.

Here’s why.

According to the law definition of territorial jurisdiction, only those living on land owned by said government are also subject to its laws. As of 1791 U.S. Government federal lands consisted of the Northwest Territory but excluded the original thirteen states of The Articles. Even so, President Washington sent in troops to silence the tax protesters of the Whiskey Rebellion.

In 1798, the Fries’ Rebellion led by John Fries of Pennsylvania, opposed the enforcement of a direct federal property tax. Even though the Whiskey and Fries’ Rebellions had not been waged on lands subject to U.S. Government territorial jurisdiction, the federal government captured and convicted rebel members for the supposed act of treason. John Fries was pardoned by President Adams after his conviction. Fries had been a “turn-coat” infiltrator for the government militia against those of the Fries’ Rebellion.

Theft of Private Property

“[E]very Man has a Property in his own Person. This no Body has any Right to but himself. The Labour of his Body, and the Work of his Hands, we may say, are properly his. The great and chief end therefore, of Mens uniting into Commonwealths, and putting themselves under Government, is the Preservation of their Property.” ~John Locke, English philosopher and political theorist, 1632-1704

slave_of_liberty_taxationTaxation on labor (income tax) was an unimaginable, unheard of kind of tax until the latter half of the nineteenth century. Labor was one’s personal property, the bread of life of natural and common law. To tax labor was considered direct theft, an outright assault against property rights of the individual.

The first income tax act Congress passed was the Tax Act of 1861. The Act stated the territorial jurisdiction of which and to whom the tax would apply: “every person residing in the U.S.” Yet, this tax was never enacted.

Soon to follow, Congress passed the Revenue Act of 1862 which led to the creation and opening of the Bureau of Internal Revenue (BIR) to collect the new income tax. For the first time, a tax on one’s labor was imposed on the people of the United States. Its purpose was to defray the many costs incurred by a Civil War already underway.

Again, in 1864, Congress authorized an additional income tax to augment the payment of war debt. This 1864 additional tax required Americans pay five percent when earning between $600 and $5,000, seven and one-half percent if between $5,001 and $10,000 and ten percent on anything above $10,000. After the Civil War, the rate modified to a flat rate of five percent and then to two and one-half percent. With the purpose of the income tax to pay off Civil War debt, the Revenue Act of 1862 was repealed and ended in 1872.

Until 1913, for forty-one years, no substantial effort was made towards the reinstatement of the 1862 income tax law. Prosperity in America reigned supreme during that period; the only tax funding the government was a tariff tax on imported goods. However, during that same period, the Supreme Court focused on several tax cases.

Supreme Court Tax Cases

An 1883 Supreme Court decision, Butchers’ Union Co. v. Crescent City Co., 111 U.S. 746, cited that one’s labor was, in fact, one’s property. Then, in another case, Pollock v. Farmers’ Loan & Trust Co, 1895, the very same Supreme Court that had supported the passage of the Tax Act of 1864, did an about-face and decided against a proposed Income Tax Act of 1894.

The Pollock v. Farmers’ Loan & Trust Co. 1895 Supreme Court decision against the Tax Act of 1894 determined it to be a direct-tax scheme and therefore unconstitutional. Given that taxation of real estate (personal property) was lawfully a direct tax, so also would be the taxation of any and all personal property, including money earned from one’s labor. Therefore, a tax on labor was exempt from the explicit tax powers of Congress granted in a portion of Article I, Sections 2 and 9 of the U.S. Constitution.

Article I. Sections 2 and 9:

“Direct taxes shall be apportioned among the several states,” and “no capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”

Decisions of the United States Supreme Court were to be bound to the written law of the U.S. Constitution, the professed law of the land.

“This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.” Article VI, U.S. Constitution

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Yet in 1913, the government overturned the 1895 Pollock v. Farmers’ Loan & Trust Co. decision. What happened? The U.S. Government laid a claim. It said that a 1913 Sixteenth Amendment to the Constitution gave them the authorization to levy an income tax on the people without the constitutional requirement of apportionment confirmed by the Supreme Court.

However, another Supreme Court case challenged government plans to renew income taxation. This was the 1916 Stanton v. Baltic Mining Co. 240 US 103 case. It decided that the U.S. Constitution clearly stated that direct taxation of the people must be apportioned to a State by a certain percentage of a State’s representation. In other words, this Supreme Court decision established that the Sixteenth Amendment had not altered, added, or removed any words from the Constitution.

“…[the 16th Amendment] conferred no new power of taxation…[and]…prohibited the…power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged….” ~Stanton v. Baltic Mining Co. 240 US 103

Given Supreme Court rulings are bound to the Constitution, one would rightly assume apportionment as regarded direct taxation would be reinstated. Wrong. “Justified” by the Sixteenth Amendment, the U.S. Government reinstated its powers of income taxation. The BIR increased their staff and operating systems to capture the coming new big wave of government funding.

300x250_SecretsOfAnExIRSHitmanRevealed1The Rest is History

Most Americans in 1913 paid no income tax. The average annual earnings of a middle-class family were approximately $800 and only people earning $3,000 or more annually were requested to voluntarily comply by filing a 1040 form to pay a one percent in taxes. A one percent income tax rate ninety-nine years ago has morphed to a graduated tax-rate of fifteen to thirty-five percent depending on one’s yearly earnings.

In 2016, those married under 65 filing jointly need to file if they make more than the filing threshold requirement for W-2 income of $20,300. This actually ends up as a much lower dollar amount (inflation –adjusted) than the $3000 original threshold requirement of 1913: In 2016 inflation-adjusted dollars for $3000 in 1913 is $71,851, which, if using the same $3000 threshold amount, would mean only those today making $71,851, or more, would need to file income tax.

Perhaps needless to say, many questions arise from the chronology of these facts and events.

“You are among the millions of Americans who comply with the tax law voluntarily.” Form 1040 Tax Instruction Booklet, 1992

Susan Boskey is author of the book, The Quality Life Plan®: 7 Steps to Uncommon Financial Security. After exposing the bottom-line of why more and more families need credit each month just to make ends meet, Susan provides game-changing practical strategies, tactics and templates to help you create a life of greater ease. You can reverse the downward trend of credit and debt while learning how to establish a long-term, debt-free lifestyle; a life that allows you to build both financial wealth and the wealth of well-being midst the challenges of today’s economic landscape. To learn more or to purchase the book, please visit her website at http://TheQualityLifePlan.com

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  • When you consider the political platform of the Federalists, which included corporate welfare, monetary inflation, deficit spending, government debt, and militarism, all designed to maintain the wealth and power of a privileged elite at the expense of the rest of the citizenry, the unlimited power to tax seems less like error and more like deliberate intention.

  • bycrystal

    For the rest of the story far beyond this article’s brief introduction – a mandatory read – “Cracking the Code The Fascinating Truth about Taxation in America” by Peter Hendrickson. Can be purchased on his website: Losthorizons. Tons of information on the website on the history or legal system, direct taxes, excise taxes, indirect taxes, privileged taxes, supreme court decisions, full review of the Internal Revenue Code and the deliberate tax fraud practiced on the American people. Should be required reading for all tax professionals and the legal profession itself.

  • joe

    If the people ever learn who gets this money and that any services provided by government is only paid for by more BORROWED money and not their tax dollars they would rise up en mass and remove said governments, But our owners have succeeded in the mass dumbing down of society so they’re probably safe for a while.

    • Brett

      I was just thinking that while reading these posts. They are working over time now on fear mongering, economic collapse and deadly vaccines to put everyone to sleep because they know if too many of us wake up they are done! We have nothing to lose now by fighting back I reckon…

  • purrsun

    And the fa$cist system is extorting tax “preparation” fees for their buds. No longer are forms/ booklets available at public libraries or post offices. When calling for mailed hard copies of my state forms, phone line disconnects. For the online fee-payers, after intense personal info collecting, cyber-security is Not what they say it is. What a convoluted mess of screw-you from dear uncle!!

    • Brett

      Totally sux!

  • George_Costanza

    So, the ‘property tax’, yeah that immoral one where you have a pay a tax to retain ownership of what you already own; is not lawful because it is not apportioned.
    How about 1 mil (1/10 of a penny) per square foot?
    An acre is 43,560 square feet.
    So if you have 1/3 of an acre, you pay $14.52, versus many thousands of dollars.

    • kennyalligood

      I think it would be far better that there be no taxes on property you own. When there are taxes you only have the illusion of ownership. If you don’t believe me don’t pay those property taxes this year and see how long it takes for the goons with guns and badges to come remind you or jail you, or kill you and then confiscate said property.

      • Brett

        The days of owning a property in Australia are over; unless you are wealthy of course. The yearly land tax is enough to prevent ownership let alone the massive inflated cost of paying for a ‘dog box’. Having said that, they are about to press the ‘reset’ button and crash the economy on a mass scale. What then? A cash-less society. Which will be even worse for all of us…

        • kennyalligood

          Not sure what a “dog box” is mate but I certainly believe a reset button of sorts is needed. I don’t have the answer of what comes next but personally wouldn’t dismiss a cashless society as it could very well be a viable system… as opposed to the current system created by the money changers based on usury, taxes, inflation, deflation, etc we have no real understanding or attempts at any other possible system.

          • Brett

            LOL. Mate, a dog-box is pretty much a run down shack that will fetch a price of around 400k. The cost of house is through the roof. I cant see our kids leaving home any time soon thats for sure. Renting is just as bad because the people who buy these ‘homes’ ask a high price to live in them. 60% of current average wage is paying for rent. Its not sustainable for the majority of people thats for sure when you consider wages have been stagnant but cost keeps rising…

          • kennyalligood

            Well thank you for clearing that up for me and yikes! I understand what you are talking about now. The US still has fairly cheap real estate in places but renting seems to be the growing trend here since those devious bankers put the screws to everyone a few years back.

  • Bullwinkle

    All laws have been codified under the United States Code. (U.S.C)
    The content of U.S.C. Title 26 is identical to Internal Revenue Code.
    Why have 2 identical laws?
    It would be considered redundant.

    My question is, does the Internal Revenue Code (IRC)
    have the same AUTHORITY as U.S.C. Title 26?
    The U.S.C would be considered Public Law.
    Is the IRC private law?

  • desertspeaks

    RECENT HISTORY concerning paying those taxes.. the US government has repeatedly and openly admitted on the record, that they have aided what they term as “moderate rebels” in Syria.
    18 USC 2331 Definitions; UNEQUIVOCALLY defines the so called moderate rebels AS TERRORISTS!
    18 USC 2339 A-C makes it a FELONY to give aid to known or EVEN SUSPECTED terrorists or those aiding terrorists.

    This makes the US government a terrorist organization according to their own laws, admissions and definitions!

    Paying/giving the US gvt any money would make you a FELON! as you would be AIDING TERRORISTS AND TERRORISM!

    • Brett

      In a nut-shell!

  • littljo

    Ol Hickory got it right – called ’em a den of vipers – his tombstone reads ‘I killed the bank’
    Then Woodie ‘the treasonous’ Wilson (should be dug up and hung upside down) gave back the unfederal b.s. bank to the den of vipers who currently steal (operate) whatever amount they want.
    QE from 2008 to 20015 now the raising of interest rates from 2016 to 2023 – hmmm every 7 years pump and dump – how odd.(QE=queen of England or quantitative easing – take yer pick)
    The IRS is nothing but a thug agency for the gold collar scum crowd that push their slow death in the form of vaccines, gmo, chemtrails,aspertame and other chemicals (glysophate) and bribe all the top dogs on the boards – this what your taxes go towards.

  • For a biblical perspective on taxation, see online Chapter 25 “Amendment 16: Graduated Income Tax vs. Flat Increase Tax” of “Bible Law vs. the United States Constitution: The Christian Perspective.” Click on my picture, then our website. Go to our Online Books page, click on the top entry, an scroll down to Chapter 25.

    • kennyalligood

      god (aka magic man in the clouds) is a fiction that has been molded through the ages beginning with the story in ancient Sumer. I recommend you study up on that before perpetuating the insane and ludicrous mantra that god has and is the answer. Maybe after familiarizing yourself with what evidence has been presented — from well before your sacred screed of a book came into existence — you will see that god is the problem not the solution.

      • Kenny, THANK YOU for demonstrating the inspiration and veracity of the Bible, especially 1 Corinthians 2:12-14.

        • kennyalligood

          Sure. I mean if you are really that ignorant to believe your plagerized history book is the culmination of everything holy there seems to be no hope for you.

          This is the part that really gets me about the adherents of organized religion. They get wrapped up in the stupidity of being the only thing that has the possibility of being “real” and closes their eyes and minds to what has actually been discovered all around us.

          Maybe if you and your like could just look into it you would finally see that your religion is nothing but a well organized plan to subvert the human race and is based not on some god but rather superior beings not of this planet.

          • There you go, again! Thanks!

          • kennyalligood

            Well I can see that your approach is centered on a very grade school type of debate tactic … in other words I really believe now that you are an idiot and can add nothing to the conversation. So wallow in your ignorance and wear those blinders like a champ because I am done with you dumba$$.

    • Pyra Gorgon

      I did. Good read. I knew some, some I did not like the quotes of those fighting against the income tax legislation back at the turn of the century. Thank you and may the LORD smile upon you.

  • Bobby Bill

    look – let’s get this one all-important principle straight in today’s America —– it doesn’t mean a damned thing what the founding documents, court decisions, or reasoned, informed arguments say. We are raped, lied to, robbed, and addressed as business entities but slandered online for the whole world to see using our real names, by a criminal out-of-control Government with little to no legitimacy on many important counts.

  • Paladin

    “every person residing in the U.S.”
    And YET people ASSUME THEY KNOW what that means, yet the VAST MAJORITY of the public doesn’t.

    We’ve got a web of deceit and the flames of tyranny are fanned because the Love of Jesus, is no place to be found.

    Hidest me from the secret counsel of evil doers, From the tumult of workers of iniquity.

  • y3shuA imMANu3l


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