The Constitution And Taxes: What's The Connection?

The Constitution of the United States grants Congress the authority to impose taxes on its citizens. This power is derived from Article 1, Section 8, Clause 1 (also known as the Taxing and Spending Clause), which states that The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises. The Sixteenth Amendment, ratified in 1913, further solidified this power by establishing Congress's right to impose a federal income tax. This amendment overturned the previous interpretation that income tax was a direct tax, which would have required it to be apportioned among the states. While some individuals and groups have argued that taxpayers may refuse to pay federal income taxes based on religious or moral grounds, these arguments have been deemed frivolous by the IRS and rejected by the courts. All residents and citizens of the United States are subject to federal income tax, and the failure to comply with tax laws can result in penalties.

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The First Amendment and the right to refuse to pay taxes

The First Amendment to the United States Constitution provides that:

> "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Some individuals and groups have claimed that taxpayers may refuse to pay federal income taxes based on their religious or moral beliefs or their objection to using taxes to fund certain government programs. They invoke the First Amendment and, often, the Religious Freedom Restoration Act (RFRA) in support of this position. However, this argument has been deemed frivolous by the IRS, and courts have consistently ruled that the First Amendment does not provide a right to refuse to pay income taxes on religious or moral grounds.

In the case of Adams v. Commissioner (1999), the Third Circuit affirmed tax deficiencies and penalties for failure to file tax returns and pay taxes, holding that the Religious Freedom Restoration Act did not accommodate the taxpayer's religious beliefs that paying taxes to fund the military was against the will of God. Similarly, in United States v. Ramsey (1993), the Eighth Circuit rejected the taxpayer's argument that filing federal income tax returns and paying federal income taxes violated his pacifist religious beliefs, stating that he had "no First Amendment right to avoid federal income taxes on religious grounds."

While the First Amendment protects individuals' religious freedom and freedom of speech, it does not override the government's authority to levy taxes. The Sixteenth Amendment to the Constitution, ratified in 1913, established Congress's right to impose a federal income tax without having to determine it based on population. This amendment settled the constitutional question of how to tax income and enabled the formal collection of income taxes in the United States.

The Sixteenth Amendment and federal income tax

The Sixteenth Amendment, which came into effect on February 25, 1913, grants Congress the authority to issue an income tax without having to determine it based on population. The official text of the amendment is 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."

The ratification of the Sixteenth Amendment was the direct consequence of the Court's 1895 decision in Pollock v. Farmers' Loan & Trust Co., which held that Congress's attempt to tax incomes uniformly throughout the United States was unconstitutional. The Court ruled that a tax on incomes derived from property was a "direct tax," which Congress could impose only by the rule of apportionment according to population.

The Sixteenth Amendment was proposed by Congress in 1909 and ratified by the requisite three-fourths of the states on February 3, 1913. The amendment was the result of a series of political events, including the financial requirements of the Civil War, which prompted the first American income tax in 1861. Congress initially placed a flat 3% tax on all incomes over $800, later modifying this to include a graduated tax. However, the income tax was repealed in 1872.

The amendment faced opposition from establishment Republicans due to their close ties to wealthy industrialists, although not all of them were uniformly opposed to the idea of a permanent income tax. Progressives in Congress, including former President Theodore Roosevelt, supported the amendment, believing that the income tax would help finance the country's increasing political and military power. The amendment's ratification was facilitated by the victory of the Democratic Party in the 1912 presidential election, with three advocates of a federal income tax among the candidates.

The Revenue Act of 1913, enacted shortly after the Sixteenth Amendment was ratified, lowered tariffs and implemented a federal income tax. However, due to generous exemptions and deductions, less than 1% of the population paid income taxes at a rate of only 1% of net income in 1913.

The Religious Freedom Restoration Act and tax exemption

The Religious Freedom Restoration Act (RFRA) was enacted in 1993 to protect the religious freedom of individuals and organisations. The Act prohibits the federal government from "substantially burdening" a person's religious exercise unless doing so is the least restrictive means of furthering a compelling governmental interest. The RFRA initially applied to both state and federal laws, but its application to state governments was ruled unconstitutional by the Supreme Court in 1997.

Despite its intended purpose, some individuals and groups have invoked the RFRA to claim that they may refuse to pay federal income taxes based on their religious or moral beliefs or objections to how taxes are used to fund certain government programs. However, the First Amendment does not provide a right to refuse to pay income taxes on religious or moral grounds. This has been affirmed in court cases such as Adams v. Commissioner and United States v. Ramsey, where taxpayers' arguments for tax exemptions based on religious beliefs were rejected.

In Navajo Nation v. United States Forest Service, the Court of Appeals for the Ninth Circuit held that the use of recycled sewage water to manufacture artificial snow did not substantially burden the religious freedom of Native Americans. The RFRA was also prominent in the Burwell v. Hobby Lobby case, where the Supreme Court ruled that closely held for-profit corporations could be exempt from complying with certain mandates of the Affordable Care Act due to religious beliefs.

The Do No Harm Act aims to clarify and amend the RFRA to restore its original intent, specifically exempting areas of law where RFRA has been used to bypass federal protections, including equal employment and non-discrimination laws. The Act ensures that religious freedom is protected without allowing the infliction of harm or discrimination against others.

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The Taxing and Spending Clause

> The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.

This clause permits the levying of taxes for two purposes only: to repay debts and to provide for the common defence and general welfare of the United States. The interpretation of "general welfare" has been a subject of debate, with James Madison and the Democratic-Republicans arguing that spending by Congress must be related to other powers enumerated in Article I. On the other hand, Alexander Hamilton and the Federalists took a broader view, arguing that the Clause authorises spending for general purposes beyond Congress's enumerated powers.

The Uniformity Clause requires that all "Duties, Imposts and Excises" be uniform throughout the United States. This clause ensures that indirect taxes are applied consistently across the country, regardless of the state or region.

McCulloch v. Maryland (1819) and state taxation

The Constitution does not explicitly state that citizens are required to pay taxes. However, it does grant Congress the authority to "lay and collect taxes". The First Amendment also does not provide a right to refuse to pay income taxes on religious or moral grounds. Over the years, there have been several court cases and amendments that have further defined the government's ability to tax citizens.

In 1818, the State of Maryland approved legislation to impose taxes on the Second National Bank, which was chartered by Congress. James W. McCulloch, a federal cashier at the Baltimore branch of the US bank, refused to pay the taxes imposed by the state. Maryland then filed a suit against McCulloch to collect the taxes.

The case, McCulloch v. Maryland, was heard by the Supreme Court in 1819 and addressed the issue of federal power and commerce. Chief Justice John Marshall handed down a significant decision regarding the expansion of federal power. The Court decided that the chartering of a bank was an implied power of the Constitution under the "elastic clause," which granted Congress the authority to "make all laws which shall be necessary and proper for carrying into execution" the functions of the federal government.

This case presented a major challenge to the Constitution, questioning whether the federal government holds sovereign power over states. It posed two key questions: Does the Constitution give Congress the power to create a bank? And can individual states tax or ban the bank?

The Supreme Court's decision in McCulloch v. Maryland established that the federal government, though limited in its powers, is supreme within its sphere of action. The laws made by the federal government in accordance with the Constitution form the supreme law of the land. This case affirmed that states do not have the power to impede or control the operations of constitutional laws enacted by Congress through taxation or other means.

The McCulloch v. Maryland decision has been influential in the United States and other nations with similar legal systems, such as Australia. It continues to shape the understanding of federal power and the relationship between the federal government and the states.

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