“Repealing the 16th Amendment on taxation to reform the current tax code.”

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Blog #27, July 11, 2014 (Tax Reform)

Perhaps the most important change to the Constitution of the five listed in Blog #24 is #4 “Repealing the 16th Amendment on taxation to reform the current tax code.” It is the “purse” that controls any government and it was Amendment XVI that changed the direction of our federal government. Along with Amendment XVII (changing election of the Senate by popular vote), the creation of the personal income tax and, by necessity, the Internal Revenue Service, gave way to the progressive’s restructure of the function of the federal government in 1913. These two amendments led to all of the social and welfare legislation by the Roosevelt (FDR) and Johnson Administrations as well as other progressive politicians.

To understand what the Founders intended we must review the original power given to the Congress in Article I, Section 8. Clause 1 of this Section reads as follows: “The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excise, to pay the Debts and provide for the common Defence [Defense] and general Welfare of the United States, but all Duties, Imposts and Excises shall be uniform throughout the United States.” (Emphasis mine.) It is these underlined words that one needs to understand the effect of Amendment XVI, which reads as follows: “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.(Emphasis mine.) Again, it’s these underlined words that need to be understood to recognize the full impact of the amendment.

I do not wish to repeat what was written in Blog #5 on Congress’ Power to tax, so I encourage you to go to my website by clicking on this URL: http://www.jamesbplair.com/Constitution-Information.html. There I explain the dramatic change between the original and the amended version. What I want to discuss today is what needs to be done to reform the current tax code which includes over 70,000 words. There is absolutely no reason to create a tax code that no one, including the agents in the IRS, can understand.

There are three proposals that have been batted around the Halls of Congress for a number of years with little or no real interest in making any tax reform. The three proposals are (1) the Value Add Tax (A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale); (2), the Flat Tax (a proposal offered by Steve Forbes on personal income and businesses), and (3) The Fair Tax (a National Sales Tax). I will ONLY discuss the latter proposal, The Fair Tax. I support this method because it is the ONLY proposal that eliminates the Internal Revenue Service, which was created by Amendment XVI in 1913. In 1999, The Fair Tax Act of 1999 was introduced by former Representative John Linder (GA) as H.R.-25, and is currently sponsored by Representative Rob Woodall (GA) with 75 co-sponsors, as The Fair Tax Act of 2013. In the Senate it is S.122, sponsored by Senator Saxby Chambliss (GA), with 8 co-sponsors. Copies of both the House and Senate bills can be downloaded from the Library of Congress by going to THOMAS and clicking on the Text of the Legislation.

A summary from THOMAS of H.R. 25, The Fair Tax Act of 2013 is:

  1. Repeals the income tax, employment tax, and estate and gift tax.

  1. Redesignates the Internal Revenue Code of 1986 as the Internal Revenue Code of 2013.

  1. Imposes a national sales tax on the use or consumption in the United States of taxable property or services.

  1. Sets the sales tax rate at 23% in 2015, with adjustments to the rate in subsequent years. Allows exemptions from the tax for property or services purchased for business, export, or investment purposes, and for state government functions.

  1. Sets forth rules relating to: (1) the collection and remittance of the sales tax, and (2) credits and refunds.

  1. Allows a monthly sales tax rebate for families meeting certain size and income requirements.

  1. Grants state’s the primary authority for the collection of sales tax and the remittance of such revenues to the Treasury.

  1. Sets forth administrative provisions relating to: (1) the filing of monthly reports and payments of tax; (2) accounting methods; (3) registration of sellers of goods and services responsible for reporting sales; (4) penalties for noncompliance; and (5) collections, appeals, and taxpayer rights.

  1. Directs the Secretary of the Treasury to allocate sales tax revenues among: (1) the general revenue, (2) the old-age and survivor’s insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund.

  1. Prohibits the funding of the Internal Revenue Service (IRS) after FY2017. Establishes in the Department of the Treasury: (1) an Excise tax Bureau to administer excise taxes not administered by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); and (2) a Sales tax Bureau to administer the national sales tax.

  1. Terminates the sales tax imposed by this act if the Sixteenth Amendment to the U.S. Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this Act.

For more information on The Fair Tax, I suggest going to this URL: http://www.fairtax.org/. I also recommend THE FAIR TAX BOOK and FAIR TAX: THE TRUTH, by Neal Boortz and John Linder. These books may be found at Barnes & Noble as well as Amazon and will help you understand the background that led up to the Fair Tax concept. Downloading the actual legislation from THOMAS at the Library of Congress is the best method to show how a National Sales Tax works, with just a little over 130 pages.

Simply put, (1) the sales tax you pay is ONLY on NEW purchases and services, (2) no 1040 to complete each year or worry about deductions, (3) no federal withholding taxes allowing you to keep your full paycheck, (4) no corporate taxes for businesses, (5) no taxes on investment earnings or on estates, and (6) will increase jobs while eliminating the cost of compliance for CPAs and Accountant’s for filing tax forms for individuals and businesses.
I believe once you have read the Act and understand the benefits of a National Sales Tax you will want to contact your Congressmen and Senators to get serious about eliminating the current tax code and the IRS.

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