Taxation and Tyranny

Lee Smith welcomes Constitutional Attorney KrisAnne Hall to examine the original constitutional framework of taxation and how far the United States has departed from the Founders’ design. Drawing on founding-era documents and early American history, Hall explains how taxation was intended to function at the state level, with the federal government relying primarily on tariffs and limited, apportioned contributions from the states. She outlines the philosophical foundation behind this structure, rooted in consent, representation, and the protection of individual liberty.

The discussion traces the pivotal shift from that system to the modern federal income tax, exploring how wartime measures, political incentives, and the passage of the 16th Amendment reshaped the balance of power between the citizen and the central government. Smith and Hall also examine the long-term consequences of direct taxation, the role of regulation in expanding federal authority, and the broader question of whether the current system aligns with the principles of a constitutional republic.

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Transcript

SPEAKER_00 0:08

The sacred inheritance of freedom. This is our leg. Lee Smith on Roots, Rights, and Reason. Powered by America's future.

SPEAKER_01 0:21

Hi, I'm Lee Smith. Welcome. And thanks for joining us for this new episode of Roots, Rights, and Reason. Founding father Benjamin Franklin is credited with the observation that in this world nothing can be said to be certain except death and taxes. Today, the deadline for filing federal income taxes, we're speaking about that second certainty: taxes. The history of income tax is not just a story of government finance, it is also a story of political conflict and constitutional debate. The income tax has been shaped by deep disagreements over the role of government and who should bear the burden of funding it. The first U.S. federal income tax was introduced during the Civil War in 1861 to fund the Union's military efforts. It was repealed in 1872 once the war and its immediate financial pressures had ended. However, with rapid industrialization in the late 19th century, populists and progressives argued that the tax system was unfair because it relied heavily on tariffs and consumption taxes, what we now call the sales tax. And that, according to the progressives, disproportionately affected ordinary people. Constitutionalists, however, argued that income tax was an overreach of federal power and a threat to economic freedom. They feared the income tax would punish success, discourage investment, and expand government control. This conflict came to a head in 1894 when Congress passed a peacetime federal income tax. Almost immediately it was challenged in court. In the landmark case of the Pollock v. Farmers Loan and Trust Company in 1895, the Supreme Court struck down the tax, ruling that it was a direct tax and therefore unconstitutional. But in 1913, the 16th Amendment was ratified, granting Congress the power to levy an income tax. But even after its adoption, debates over income tax did not disappear. Instead, they shifted to questions about how the tax should be structured. During World War I and World War II, tax rates increased dramatically, and the income tax expanded to include a much larger portion of the population. In the decades that followed, income tax remained a central issue in American politics. Some argued that people who own more should pay more, which is known as progressive taxation. Yet others pushed for lower taxes to promote economic growth and individual freedom. These debates continue today, reflecting enduring differences in values and priorities. Today we're speaking with Chris Ann Hall, constitutional attorney, former state prosecutor, author of several books, filmmaker, and radio host. And thank you, Chris Ann Hall, for being here with us today on Roots, Rights, and Reason. Today in our special income tax day episode, we're speaking about what uh our founding father Benjamin Franklin was wont to call the second certainty in life. First is death, second is taxes. Chris Ann Hall has a fascinating historical perspective on this. Chris Ann, thank you so much for being here with us today on Roots, Rights, and Reason.

SPEAKER_02 3:51

Oh, well, thank you again for having me as your guest today. I'm I'm I'm really honored. And this is actually, I don't want this to be taken the wrong way, but it's kind of a fun topic for me because, in the eyes of our founders, this was a very clear and settled topic. Where we are today is completely antithetical to everything that they expected for us. And I know you said that even though Benjamin Franklin said the two things that are guaranteed are are death and taxes, our founders had a very settled perspective on how taxation was supposed to happen in America. And again, we could not be further from where we were established to be.

SPEAKER_01 4:39

Fascinating. I mean, I I know uh so little about this, but I do know that that tariffs were important, that Alexander Hamilton thought tariffs were important for economic security as well as national security. We needed to be able to build things. And here where I live in Charleston, South Carolina, we have our famous beautiful customs house, which is where a lot of uh a lot of money was collected and then sent to the federal government. But if you can give us the historical background background on this, what what was their original conception of taxation? And I I know it's a long, it's a it's a long, ugly history, but how did we get to where we are today?

SPEAKER_02 5:19

Well, I think one thing that we need to understand is, again, they had a very settled understanding of how taxation should work in a society uh built where our constitutional republic is built on the foundation of natural rights and liberty as they're as it's properly defined. And I want to read to you uh two quotes that will help you give an understanding of where they came from. Now, this one is from Samuel Adams, something that that he wrote on May 15th, in 1764. This is the beginning of our education and our organization to protest against the British government and how they're creating legislation without representation. Now, remember, we do taxation without representation. The reality was it wasn't just taxation, it was all legislation without representation. And so uh Samuel Adams said, if our trade may be taxed, why not our lands? Why not the produce of our lands and everything we possess or make use of? This we apprehend annihilates our charter right to govern and tax ourselves. We are not, are we not reduced from the character of free subjects to the miserable state of tributary slaves? So our founders believed that the central government, being at that time Great Britain, if it could tax your property, your land, your wages, your uh produce, things that you make, things that you engage in commerce with, that would reduce you to a tributary slave. And what that really meant was tributary meaning you were paying the central government for the privilege of literally living. And that's where we begin with this understanding that federal tax is the most violent attack on the people. So when Benjamin Franklin was talking about the necessity of taxation, he was not talking about the necessity of taxation at the central government level. So the second quote I want to read to you is a letter that Thomas Jefferson wrote to Lord North, uh a British uh lord at that time in 1775, talking about the importance of the people to have control over whether they pay taxes or not. He says this privilege of giving or of withholding our monies is an important barrier against the undue exertion exertion of prerogative, which, if left altogether without control, may be exercised to our great oppression. And all history shows how efficacious is its intercession from redress of grievances and reestablishment of rights, and how improvident it would be to part with so powerful a mediator. So our founders believed that taxation would exist in two ways: a taxation on the people at the state and local level for consumption taxes, basically what we call sales tax, a taxation at the federal level, but not on the people. As you mentioned, the federal taxation would take place in one of two ways. First, and most abundantly through tariffs. Uh, you had mentioned Alexander Hamilton, but but James Madison wrote a very important piece on that in Federalist 45, saying that the most part of the funding of the federal government would come from tariffs in the rare, and this is not to lose its its relevance and irony in this. He said the rare occasion in which America will be at war, the taxation would then be collected from the states. And that's where Article One, um Article One, Section Two, Clause Three comes in of the Constitution that taxation is to be assessed upon the states through apportionment. How many they have in the population will depend on how the state pays that portion of their taxes. Higher population, you owe a higher uh tax burden, lower population, you owe a lower tax burden.

SPEAKER_01 9:59

And so the federal government I just want to make sure that I have this clear. So there uh if there was going to be a taxation, it would come from a sales tax. The state would have that sales tax, and then in the event of war or something else, then a portion of that, uh, a portion of that, those taxes collected would go to the government in order to provide for our self-defense.

SPEAKER_02 10:25

Is that I just want to make sure I have the Yes, but importantly, this the distinction had to be that the federal government would collect those taxes from the state. They would never have the authority to stick their hands in our pockets. Let me let me find this.

SPEAKER_01 10:44

This is f this is fascinating, very interesting.

SPEAKER_02 10:46

Yes, absolutely. Um George Washington said this about the British central government taxing the people. He said, I think the Parliament of Great Britain have no more right to put their hands into my pocket without my consent than I have to put my hand into yours for money. So their idea was that the central government's only control would be over the states, that the central government would never ever have personal access directly to the assets, to the money, to the lives of the people, period.

SPEAKER_01 11:25

So was there was there, so that's how the founding fathers thought it. Were their founding fathers thought about it? Were their founding fathers who said, Yeah, you know, I know we had problems with the crown, but to move forward and Hamilton's ideas about a tariff or tariffs are great and sales tax is good, but look, really, to be a real country, we we to be a really big, powerful country and fulfill our destiny, we really need to start you know taxing, taxing regular American citizens too. When did that debate start?

SPEAKER_02 11:57

Yeah, I can tell you that if that discussion happened, it was done very quietly and was not well received. The relevant thing that we need to understand is not what was the discussion in this case, but what was the end result. And the end result was Article 2, Article 1, Section 2, the apportionment clause, and the ability in Article 1 uh for Congress to lay tariffs. And so exactly what Madison said in Federalist 45 was exactly how the Constitution was written, exactly how it was set up was exactly how it was intended. Not simply because, oh, it's a new country, we gotta start this, but because our founders relied heavily on the experience they had and the the despotism that they experienced when central government had a direct, as as Washington put it, hand in our pocket. So then so our founders would have never tolerated this.

SPEAKER_01 13:08

Yeah. And so, but going into civil war, things changed. Is that right? That's the first, that's the first, that's that's a break with the family, that's a big break with the framers.

SPEAKER_02 13:20

It is, it's a big break with the framers. Well, this the the whole history from 1830 to 1862 is where our break from the framers really, really kicked into gear in relationship to state and federal relationships. Uh, there's a whole history there that that really deserves a lot of attention that that we can't get into today. But the bottom line, the break here is exactly the break from Moy Madison described in Federalist 45. We're at war, right? So there's supposed to be in an a need above what tariffs cover. And the Constitution then established that the need above the tariffs can cover would be assessed to the states based on their population. But remember, we're states at war, and I think that the federal government thought that they might lose support for the war if they started taxing the states at a high level uh to pay for the war, because the states would have to take that money out of their budgets. So what they did was they appealed emotionally to the people, which legislators love to do when they know they can't pass legislation. You know, they appeal emotionally.

SPEAKER_01 14:47

When they know they don't have reason on their side, they go to emotion, of course.

SPEAKER_02 14:51

Right, exactly, right. So, you know, the ethos logos kind of uh pathos uh perspective. And so what happened was the income tax was put forward on a very, very I'm sorry, I'm laughing just because it's so ironic, uh very, very limited basis. It was promised that only people who made more than$600 a year, which was, you know, literally six figures at this point, would be paying the taxes, and it would only be temporary to sunset at the end of the war. Now, this is where the interesting political transition came into play because that income tax did sunset at the end of the war. But federal politicians had now a taste of what it was like to have a free flow of income that, if we can just be totally honest, can't be opposed, right? The entire reason our founders established the apportionment clause as the way to pay for extra taxes was because they knew that the states would not only have the authority, but would also have the power to say to the federal government, we're not paying that because you're spending over and above what we have delegated authority for you to do. For example, if we worked for a court through apportionment, the states would be able to look at the federal government and say, you know what? We never delegated to you the authority to have an environmental protection agency. So we're not going to pay for your Department of Environmentality.

SPEAKER_01 16:52

That's that's fascinating. So responsible governors, responsible state legislators are like, wait a minute, you're not billing us for this, and we're not going to pay for it. But but once you start billing individuals, it's like we can't muster that, we can't muster that sort of fight against the the federal government.

SPEAKER_02 17:09

No, because the individual goes to jail. You can't send a state to prison.

SPEAKER_01 17:14

That's really interesting. Yeah, yeah.

SPEAKER_02 17:17

It was the despotic nature of direct taxation that we experience today. The exact scenario is what our founders experienced and did not want to subject us to. So they built in our federalism uh creation. You know, we are a union of states that created the central government with multiple layers of checks and balances, not just simply internal, where the three branches check and balance each other, but the the states also were left with the duty and the authority to be an external check on the federal government's exercise of power, keeping them in their limited and defined specific.

SPEAKER_01 18:06

So so after, so okay, so it's repealed, the income tax is repealed, the union is victorious, the country stays together, becomes powerful. When do we get to when is the so when is it returned? When does it come back? The law legislatures, legislators have a taste now, federal legislators, senators, house representatives have a taste for this big budget. So when does the income tax return?

SPEAKER_02 18:31

Yeah, so this is really the interesting thing, and and I I do have to warn because at this point uh I'm not who sure exactly who's going to be watching or listening. This is where we have to be careful about the cognitive dissonance coming in and shutting down because even though it was uh the People's Party, which is a progressive party, that re uh renewed uh this drive for income tax, it's actually the Republican Party through President Roosevelt and Taft and several key Republican congressmen who would give a this income tax its renewed measure of life. Uh and then, of course, there would be the bipartisan support of the Democrat Party. So you had a whole team effort at the federal level to bring this back. So in 1906, so my timeline here, uh President Theodore Roosevelt, Teddy Roosevelt stated this, and this is a quote a graduated income tax of the proper type would be desire a desirable feature of federal taxation, and it is hoped that one may be devised which the Supreme Court will declare constitutional. And then Taft, who came after uh Roosevelt, said that I believe that an income tax, when the protective system of customs and internal revenue tax shall not furnish enough for governmental needs, canon should be devised, which under the decisions of the Supreme Court will conform to the Constitution. So you have Roosevelt saying we've got to craft this income tax in a way that is palatable to the Supreme Court. Taft says, no-uh, what we need is to convince the Supreme Court to give it its blessing so everybody will believe it's constitutional.

SPEAKER_01 20:40

Fascinating. So um, so what happens? When what what when does it start? When does the permanent income tax start? Because I know there were some earlier there was some constitu there were some debates, uh, there was a Supreme Court decision as well. So uh what's the what's the uh uh Anus horibolis in which the uh the income tax you know we have that that long history.

SPEAKER_02 21:07

I think one thing that I'd like to mention is that uh a lot of people know about the income tax, but very few people actually read the 16th Amendment, which is is very vague, by the way, and very nondescript. Most of what you have uh that has become our income tax system is congressional uh law and regulation, which takes the 16th amendment and just exponentially explodes it to a point where I think even Taft and Roosevelt had no idea what what they were creating. But it was in 1913, so it took from 1906 to 1913 uh for the 16th Amendment to actually be established, because along the way they actually Had the opposition of the Supreme Court in June 16th, and I I I'm sorry, I don't have the year, but when Taft was president, they gave support to a constitutional amendment that read the Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several states according to population. And the joint resolution containing that amendment passed unanimously in the Senate 77 to zero. So what had happened was you now have unanimous consent of this federal taxation, which quite ironically is the federal government voting to fund itself. I mean, why would they? For really seven 77 to zero in the Senate.

SPEAKER_01 22:59

Why um why do we have arguments now still, now that the income tax has become uh what appears to be a permanent feature of our system? What are the debates about uh progressive, uh progressive tax? Can you talk can you talk about that a bit?

SPEAKER_02 23:17

Well, remember, it was it was designed to be a progressive tax, but because uh yeah, that so most people don't realize Tom uh Theodore Roosevelt was the head of a group called uh the Progressives of 1912. So even though he was a Republican, he was a progressive. So the entire idea was that this tax would only be assessed on high-income owners. And that's how we define progressive taxation, right? The more you make, the more you're taxed. And so anybody who made less than 600, which would be the regressive part, uh, would not have to pay taxes. Anybody who made$600 a year or up would pay taxes that were pursuant to what they make, right? And so what has happened over the years is not necessarily the original system, but the bar has changed on who gets taxed and how much. And I think that you can seriously argue that the whole discussion exists because of the very discussion that our founders had in the beginning, that every single human being in America understands that federal income tax is despotic. So everybody's trying not to pay it.

SPEAKER_01 24:43

Right. Yeah, right. Um uh let me ask you, because we're we're running out of time. So last question. Uh Donald Trump said a little earlier during his during this term, during his second term, he said, you know, I I I think I think it might be possible to eliminate the federal income tax and we'll make it up with tariffs. Do you think that's uh impractical, or is that something that uh that an administration could could really do and uh the government will be able would be able to f uh fund itself, or do you think at this point we're kind of locked into the the the income tax?

SPEAKER_02 25:20

Well, I I have I have a very ex uh historically and human nature-based perspective on this. First, I don't believe that we can continue with the income taxation system that we have. I just I think it's completely self-destructive. There's not we we can't maintain this. Uh, we our income tax system has driven us into a socialist government perspective. And everyone knows that social gov socialist governments uh internally burn and explode, and we're headed down that road. If we're going to actually remain uh a constitutional republic, if we're going to actually remain uh the United States of America based on the principles upon which it was founded, this is going to have to be changed. And uh the I do believe that the tariff system was and is a successful system, but it cannot coexist with direct taxation. The only way the American people will see the tariff system working successfully is through the elimination of the income tax. I mean, if you think about it, our every dollar I think is taxed like seven times. If you add the um tariffs on it, you're just adding more layers of taxation on each dollar.

SPEAKER_01 27:01

Interesting. So do you think that Donald Trump, when he that he came to see that, he said, well, look, tariffs are very important. We need to erase the the trade deficit. But as he implement them, of course, there was a lot of noise in the media and a lot of uh noise from Democrats as well. But do you think he came to realize that point, like, well, look, even though I think that uh tariffs are an important instrument, we have to admit people are, you know, with with the income tax, there's federal income tax, there's state, there's local, where I live, our local income tax is insane. Um, but yeah, do you think that Trump sort of came to that or came to the conclusion the same way? People, these dollars are overburdened by by the federal government.

SPEAKER_02 27:43

Well, I think that, and and I don't I don't want to put words in his mouth or even speculate on on his his pathway to realization, but I think if we look at this logically, there are no people better at understanding the burden of taxation than business people. Uh so you get career politicians in office. That's how you get people who don't understand taxation because a career politician has never had to pay taxes like that in their life. As a matter of fact, they get around paying taxes. And so a business person, a private business owner understands the impact of taxation. And a private business owner also understands the success they could have without that taxation. And what our founders knew was the lower the taxation, the greater the liberty, the greater the national prosperity because the greater the personal prosperity. So our founders wanted less government, more liberty, which guaranteed greater prosperity for the individual, which always equates to greater prosperity for the nation. And so a private business owner would be able to come up with to come to this conclusion. I I believe that he had some advisors that explained to him the constitutional background for tariffs, although they didn't actually explain to him very accurately, because the president doesn't have tariff authority constitutionally, that's reserved to Congress. But nonetheless, uh I I believe that at this point, the way the tax code is written, the way the 16th Amendment is written, an executive president with the right information and the right motivation could significantly change how income tax uh impacts the people. Because a majority of our income tax impact is based on legislation and regulation are based on regulation rather, not legislation. So in my constitu as a constitutional attorney and someone who has studied the constitutional history um extensively, the president of the United States has the authority to adjust, change, and even eliminate certain mechanisms of regulation. Trump has already done this uh with uh uh religious entities, nonprofits advising AIRS, you have to respect them, 501c3s and all of that. We all know how that hit the public. He could do the same thing for individuals. And I think that there's a window now that exists that never existed before from a constitutional law perspective. And that's because the current sitting Supreme Court just completely executed the Chevron doctrine, which said that the executive branches could come in and fill in the blanks where the legislation is vague and overbroad. The Supreme Court said no, you can't do that. If the legislation is vague and overbroad, you can't fill in the blanks. Congress has got to rewrite the law and make it specific. President of the United States, whether it be Trump or someone else who really wanted to make an impact on income taxes, could have their income tax IRS experts go through there and say, this is vague, this is vague, this is vague. The Supreme Court has said because these provisions lack definition, we cannot enforce them until Congress rewrites the law.

SPEAKER_01 31:44

Uh for next year or perhaps the year after. Unfortunately, not in time for this year, uh, will it affect our income taxes? But maybe, maybe sometime soon in the future. In the meantime, Chris Ann Hall, thank you so much for being with us again on Roots, Rights, and Reason. And thanks to all of you for watching. We'll see you in our next episode of Roots, Rights, and Reason.