We should first keep in mind that with the exception of the Civil War, the American people lived without an income tax from the beginning of the United States until 1913, when the 16th Amendment was adopted.
This was not an accident. Americans living during that period of time understood that freedom and an income tax were contradictory notions. If people wanted to live in a free society, it would have to be a society in which government was prohibited from levying taxes on income. Conversely, if people wanted to live in a society in which government is taxing income, then the price they pay is the loss of freedom.
In an income-tax free society, everyone is free to keep the fruits of his earnings. He keeps everything he earns. He is free to accumulate unlimited amounts of wealth. He is free to do whatever he wants with his own money.
And there is nothing the government can do about it because the government is prohibited from taking any portion of a person’s income from him.
There is no IRS. There are no income-tax returns. There are no deductions to keep track of. There is no need to keep records.
There is no withholding tax.
Again, everyone simply keeps everything he earns and decides for himself how to spend it, invest it, donate it, or otherwise dispose of it.
This is what Americans once believed was an absolute prerequisite to a free society. That’s why Americans lived without an income tax for more than 100 years.
Everything changed in 1913, when socialist ideas were being imported from Europe into the United States. That was the watershed year, the year that brought into existence what would become the twin jugular veins for the welfare state and warfare state — the income tax and the Federal Reserve System.
From that date forward and continuing through today, Americans would be coerced, on pain of fine and imprisonment, into sending some governmentally imposed percentage of their income to the IRS.
The magnitude of that change cannot be overstated, for it actually inverted the historical relationship between the American people and the federal government.
Prior to the enactment of the income tax, the relationship between the citizen and the government was one of master and servant. The citizen, who was free to accumulate unlimited amounts of wealth, was sovereign because there was nothing the government could do to interfere with that process. The government was the servant.
The nature of that relationship fundamentally changed in 1913. With the enactment of the income tax, the citizen became the servant and the federal government becoming his master.
How was this so? The income tax effectively nationalized people’s income, in that it placed everyone’s income at the disposal of the government. While before, government lacked the power to take any portion of people’s income, now it wielded the power to take any or all of their income. It all depended on the specific percentage that the government required people to send to the IRS.
Sometimes the government is nice and sets a lower percentage. Sometimes it’s not so nice and sets a higher percentage. But what matters with respect to freedom is not the particular percentage that is set but rather the fact that the government has the power to set the percentage. By having that power, the amount of income that the government permits people to keep effectively becomes akin to an allowance that a parent permits his children to have.
As April 15 rolls around once again, let us remind ourselves what Jefferson stated in the Declaration of Independence: that everyone has been endowed with certain unalienable rights, including the right to life, liberty, and property. For more than 100 years, Americans understood that such natural, God-given rights encompassed the right to accumulate unlimited amounts of wealth and the right to decide what to do with that wealth.
Too bad 20th-century Americans consigned themselves and their successors to a life of subservience and servitude by abandoning the income-tax-free heritage of their ancestors and making the income tax a permanent feature of American life.
Jacob Hornberger is founder and president of The Future of Freedom Foundation.