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    Who are the NERD fund donors Mr Snyder?

    Raise the curtain.

    Continuing to Beat the Fair Tax Drum - The Government's Authority to Tax

    By Kevin Rex Heine, Section News
    Posted on Tue Jul 14, 2009 at 08:27:13 AM EST
    Tags: essay series, Michigan FairTax Proposal, Michigan TEA Party, Michigan Fair Tax Manifesto (all tags)

    (How's THIS for a discussion starter? Promoted by Nick...)

    Michigan TEA Party activists, a growing movement across the state, convened near Lansing on Saturday, June 13th, 2009, to hear speakers, learn about grassroots activism, and show a sense of support for possible 2010 ballot initiatives.  The Michigan FairTax Proposal (MFTP) was selected by the majority of voting delegates as the proposal of choice to unify behind and support, from amongst four suggested initiatives.  The MI FairTax focuses on job creation and economic growth by changing the method and structure of the state's tax system from taxing income to taxing retail consumption.

    It's a fairly well-known fact to regular contributors to this site, to my associates at the Kent County Republican Committee, Libertarian Party of West Michigan, and TEA Party of West Michigan, and to just about anyone who knows me well that I am an open and unapologetic (and occasionally shameless) advocate for, and supporter of, the Michigan FairTax Proposal.  I am so because I have done the "deep-digging" homework on this proposal, and fully understand its value.  With this in mind, I intend to present a series of essays to explain the reasoning behind this proposal in what should be an easy-to-understand way - under the umbrella title of "Continuing to Beat the Fair Tax Drum."  The first of these essays I present here:

    The Government's Authority to Tax

    A group of counter-arguments (and I am using that term loosely) that I hear every so often from people who are opposed to the Michigan FairTax Proposal tends to run along the lines of, "The government doesn't have the authority to tax us now, why should we give it to them?"  Or, "There's nowhere in the Constitution that allows the government to tax, so I don't want it in there."  Or, "The only reason that the government can tax us is because we're not using lawful money, so we need to focus on dissolving the Fed."  Or, "According to the Internal Revenue Code, all personal taxes are voluntary, so why should I want taxes to be mandatory?"  Or, "Sure, the government can tax, but only for specific purposes."

    I'd add a few more, but I think you get the idea at this point.  I'm not trying to quote these arguments verbatim . . . I'm content to get the substance right, and we know I've accomplished that.  Let's get something straight right now; the government has the authority to tax.  I don't care what level (federal, state, or local) we're discussing, or even what tax we're discussing, the government has the authority to tax . . . period.

    Article 1, Section 8 of the Constitution of the United States is frequently referred to as the Enumerated Powers of Congress.  The very first sentence of that section states very plainly that, "Congress shall have power to lay and collect taxes, duties, imposts and excises, . . ."  There it is, right there; you can't parse your way around it.  "Duties, imposts, and excises" aren't the types of tax that the government can levy (as some claim); all four items are separate and distinct methods - constitutionally available to the government - for the government to raise operating revenue.  And nowhere in the rest of that section, or anywhere else for that matter, does the Constitution place any requirement on what that revenue can be used for.

    More than one person has told me that the rest of that sentence, ". . . to pay the debts and provide for the common defense and general welfare of the United States; . . ." is essentially the same as saying what that tax revenue is supposed to be used for.  While that may indeed be so, 220 years of American legal precedent argues that those three things cover a considerable amount of ground.  The rest of Article 1, Section 8 (not to mention the rest of Congress' powers as laid out elsewhere in the Constitution) involves the expenditure of large sums of money and sort of assumes, by extension, that the money's going to have to come from somewhere.

    And the authority to tax doesn't merely reside in the U. S. Constitution.  Article 9, Sections 1 and 2 of the Michigan Constitution provide the State Legislature with identical authority.  Keep in mind also the 16th Amendment (the much-despised income tax amendment):  "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."  Yup, the power and authority to tax your paycheck (or any other revenue source) is right there in the Constitution - federal or state - whether you like it or not.

    Though we've somehow forgotten this, the founders knew well that there is one (and only one) legitimate use for a tax system; to ensure that the state has enough revenue to cover the expenses of its legitimate functions.  Let me say that again, just so we're clear.  The only legitimate use for a tax system is to ensure that the government has enough revenue to cover its legitimate operating expenses.  (By this I'm referring to the expenses involved in the government operating within its legitimate functions.)  Any other application invites abuse and tyranny, and the founders knew this, too.  The essence of freedom is the proper limitation of government, but without the rule of law freedom cannot exist.  So the government has its legitimate functions, and the only legitimate use of the tax system is to provide a legitimate funding source for the legitimate expenses of carrying out those functions.  Did you notice the recurring theme in this paragraph?

    But any way you try to slice it, compliance with the Internal Revenue Code is not a voluntary matter.  On its own website, the Internal Revenue Service goes to great lengths to expose the multi-faceted myths of various Anti-Tax Law Evasion Schemes (to the point of laying out the facts and legal arguments in a very plain and direct fashion).  The only thing voluntary about individual compliance is that fact that the government allows us to calculate our tax liability on our own, as opposed to having them do it for us.

    Hale v. Henkel (201 US 43), a 1906 SCOTUS decision, contains a paragraph on page 74 that is relevant here, in that it delineates where the government's authority to tax becomes effective.  The essence of that paragraph is that if someone goes about his business in such a way that nothing is received from the government except the protection of rights that are not trespassed, then the government has no authority to intervene.  To simplify, the government has no authority to touch a business transaction that it isn't involved in.  This ruling has been rightly read over the past century or so to interpret that the government has no authority to tax a transaction in which money isn't used.

    Let me provide an example:  Last summer I was hanging out at a certain bar, and the bartender, Anna, approached me and told me that her laptop computer was giving her some problems.  Knowing that I have an IT background, she asked me if I could help, and what I'd charge her for my time.  Normally, I charge twenty-five dollars an hour for freelance work, but I wasn't interested in money that particular evening . . .

    (I know what you're likely thinking, and this isn't where that's going.)

    . . . So I told her that I'd go hang out with her laptop over in the corner booth and see what I could do.  In return all I asked for was a beer an hour that didn't show up on my tab.  Three beers later, Anna's laptop was cleaned up, a trial version of the best anti-virus software available on the market had been installed, and she happily tipped me a large to-go cup of fresh coffee on my way out the door.

    Because no money changed hands, the government (regardless of federal, state, or local) had no authority to tax that transaction.  I am curious, I suppose, as to whether the "revenuers" would be willing to accept alcohol as a form of payment.

    Nor does the argument about "lawful money" versus "fiat money" hold any water in this discussion.  The essence of that argument is that fiat money is not directly issued by the United States Treasury, has no intrinsic value, and violates the Constitutional prohibition that only Congress has the authority to coin money and regulate the value thereof (art. 1, sec. 8).  Thus, the argument is extended that taxation can only legally apply to transactions involving the use of lawful money.  But here's the problem with that; even though it's by government decree instead of through intrinsic value, Congress still sets the value of those pieces of paper, and is therefore properly regulating the value of American money.

    While the states are prohibited by Article 1, Section 10 of the Constitution from making anything but gold and silver legal tender within their boundaries, no such limitation is imposed on Congress.  Paper money, thanks to Treasury Secretary Salmon P. Chase, has been around (1861) since well before the creation of the Federal Reserve System (1913).  It doesn't matter if it's coin, currency, bank draft, check, money order, wire transfer, or credit card; if Congress has declared it legal tender, then it's legal tender and taxable as such . . . again, whether you like that or not.  Even were we to revert America's monetary system to the gold standard, the only thing that would be accomplished would be to back every single dollar in circulation with an equivalent value of precious metal; the various mediums of exchange should not be expected to cease to exist.

    Mind you, I'm not saying that we shouldn't submit the Federal Reserve System to an audit, as two bills currently making way through Congress propose to do.  Quite frankly, an organization that has that much single-source influence over our nation's economy ought to be subject to congressional oversight and independent audit on a regular basis.  What I am saying is that the currency argument is completely independent of the argument over the government's authority to tax.  And the problem with the government's authority to tax isn't that they have it, but rather that they've abused it.

    Back in 1964, Robert Byers testified before Congress that as long as the government has the power to tax, they can always take from the people whatever they need to keep any program running that they choose to.  At that time, Robert Byers was the actuarial head of the Social Security Administration, and he was testifying that day because Congress wanted to know why the Social Security Trust Fund was nearly 300 billion dollars in the hole.  This was his solution; just raise taxes and it'll all be good.  But indirectly he has also told us what we can do about the government's abusive tax practices, at least at the state level here in Michigan.

    The key to putting the government back on its constitutional leash is to cut off its tax supply.  Now let me be clear that I'm not advocating not paying your taxes, not at all; especially since we've just established that compliance with the taxation authority of the government is not optional.  What I am advocating, rather, is taking the control of the tax system out of the government's hands and giving it to the people.  That's because asking the government to self-limit makes about as much sense as asking a fox to guard your henhouse, or putting an illegal alien in charge of border control.  While the government controls the tax system, it never truly answers to the people, and any reform we enact will never permanently hold.  So starving the government into submission is where we must start.

    Through the ballot proposal process - authorized by Article 12, Section 2 of the Michigan Constitution - the citizens of Michigan have over time enacted multiple tax protections, civil rights guarantees, and various other citizen protections and limits on the government's power.  In like manner we can, through a ballot proposal, amend the state constitution to lock the tax system of Michigan away from the state government's control . . . permanently.

    In May of 2007, State Representative Fulton Sheen, with thirty-six co-sponsors, introduced House Joint Resolution "L" - the Michigan FairTax Proposal.  This proposal amends Article 9 of the Michigan Constitution to accomplish two things:  First, it removes the current state-level income tax and all state business taxes, and modifies the state retail sales tax.  Second, it prohibits the restoration of old statewide taxes, or enactment of new statewide taxes, or an increase in the sales tax rate, without a vote of the people.

    Do you see what this proposal does?  It uses the one form of taxation that has no loopholes (seriously, how do you get around a sales tax?) and makes it the only permissible form of taxation at the state level.  It then takes the entire state tax system and locks it behind a constitutional firewall, so the state legislature cannot fool with it again absent voter approval in advance.  But because the Legislature has consistently refused to vote the measure onto the ballot, the Michigan Fair Tax Association is now targeting the 2010 ballot as a citizen-initiated proposal.

    This, then, is our challenge; to begin the process that ends with the government back where it belongs, and us free to live our lives as we see fit.

    < Tuesday in the Sphere: July 14 | Tim Walberg Announces for U.S. House >

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    maybe a good first step ... (none / 0) (#1)
    by theclassiclib on Tue Jul 14, 2009 at 04:03:32 PM EST
    I was getting ready to say the Fed is a completely separate topic, but then you cleared that up.  Monetary policy is a major issue for me (econ geek), and it's vital that every taxpayer start taking it more seriously ... but it's still an entirely different topic.

    A consumption tax is at least moral, while taking someone's income is not.  My concern in advocating a "new and improved" revenue stream for the State, however, is the politicians inability to "just say no" to a spending bill.  Regardless if they have the revenue or not!

    Here's our problem ... even if a "fair tax" resulted in lower revenue for the State, it still retains the power to spend as much as they please!  And as always, "we the people" get the short-end of the stick.

    I have no problem with the fair tax, in and of itself, but like every other proposal I hear these days, it doesn't get to the heart of the problem - a government that has extended it's powers and authorities way past what's written in either the State or federal Consitition.

    POWER is our problem.

    "We the people" need to put our Overlords in both Lansing and Washington, into submission.  Until politicians are legitimatley bound "by the chains of the Constitution," the taxation scheme matters not.

    I fully expect... (none / 0) (#3)
    by KG One on Tue Jul 14, 2009 at 04:44:11 PM EST
    ...this year to look like 2007's debacle.

    Both the House & Senate will be "negotiate" until the last minute, they will come to an impasse due to the fact that that cannot find the backbone to make any actual substantial cuts, Mike Bishop will turn yellow (again) and allow a tax vote in the Senate, Michigan Democrats will get their tax hike passed (I agree with services getting hiked), spending problem gets pushed off for one more year.

    Anyone disagree with that assessment?

    • In reply . . . by Kevin Rex Heine, 07/14/2009 09:16:50 PM EST (none / 0)
    Grab some coffee . . . (none / 0) (#4)
    by Kevin Rex Heine on Tue Jul 14, 2009 at 09:10:39 PM EST
    . . . sleepyhead.  This particular essay is about as long as my speech from a week ago.  If it helps, then pretend that you're back in the East Tawas City Park listening to the essay instead of reading it.

    Fair Tax Questions (none / 0) (#7)
    by DrDetroit on Wed Jul 15, 2009 at 08:34:57 AM EST
    Kevin, thanks for the personal invite to join.  

    Is there a proposed sales tax percent proposed with the ballot proposal?

    Also, the ballot proposal appears to do a lot.  How does that compare with what the Democrats tried to do last year with their ballot proposal?  A court rules their initiative could not appear on the ballot because it changed to much of the State Constitution with one proposal and needed to be broken down into seperate ones.  Could this proposal have the same problem?

    Lastly, where you the blogger from Right Michigan that was on Off the Record?

    DING, DING, DING . . . (none / 0) (#10)
    by Kevin Rex Heine on Wed Jul 15, 2009 at 02:30:50 PM EST
    . . . good answer.  Also note that the prebate isn't as complicated as our opponents may wish to make it.  There are a grand total of two requirements to qualify for the prebate:

    1. Be an adult

    2. Be a legal resident of Michigan

    Thus, one critical element of the prebate is that it is deliberately designed to deny benefits to the illegal alien population of this state.  But anyone who meets those two requirements, regardless of income level, gets the prebate check . . . period.  Even though everyone meeting those requirements gets it, the poverty-level and blue-collar families will benefit most, as Jason has already pointed out.

    Seriously? (none / 0) (#11)
    by stevenstmason on Thu Jul 16, 2009 at 11:02:53 PM EST
    You can't even start the discussion without first running through all the wingnut objections to the income tax? No wonder this idea never goes anywhere.

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