Payroll Taxes: Where In The Constitution?

The 16th Amendment to the U.S. Constitution, ratified on February 3, 1913, grants Congress the authority to impose and collect federal income taxes without having to determine it based on population. This amendment was the culmination of a series of events, including the financial demands of the Civil War, which led to the first American income tax in 1861, and the progressive era of the late 19th century, which saw the rise of political and social reform movements advocating for a federal income tax as a fairer way to fund the government. The 16th Amendment settled the constitutional question of how to tax income and marked a significant shift in the way the federal government received funding. It is important to note that some individuals and groups have challenged the constitutional legality of tax payments, citing various amendments, but courts have consistently ruled against these arguments.

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The 16th Amendment

> "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."

This amendment was the result of a series of political events and shifting popular opinion in support of a progressive income tax. In 1909, progressives in Congress attached a provision for an income tax to a tariff bill. Conservatives, hoping to kill the idea, proposed a constitutional amendment, believing it would never be ratified by three-fourths of the states. However, the amendment was indeed ratified by the necessary number of states, and on February 25, 1913, it took effect with the certification of Secretary of State Philander C. Knox.

The first American income tax was introduced during the Civil War in 1861 by Abraham Lincoln, with Congress placing a flat 3% tax on all incomes over $800. This was later modified to include a graduated tax. However, Congress repealed the income tax in 1872, and it was not until the 16th Amendment that the federal income tax was reintroduced.

Federal income tax

The power to collect income tax is derived from the United States Constitution, specifically Article 1, Section 8, Clause 1 (also known as the Taxing and Spending Clause). This clause states:

> "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;"

The Sixteenth Amendment to the U.S. Constitution, ratified in 1913, further solidified Congress's right to impose federal income tax. The amendment states:

> "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."

This amendment addressed concerns about the constitutionality of income tax, specifically whether it was a "'direct'" tax that needed to be collected based on the population of the states. The amendment clarified that income tax could be levied without apportionment among the states.

The history of federal income tax in the United States dates back to the Civil War, when Congress first imposed a flat 3% tax on all incomes over $800 in 1861. This was later modified to include a graduated tax, but the income tax was repealed in 1872. The idea of a federal income tax persisted, and it gained momentum during the Progressive Era, with progressive groups advocating for it as a fairer way to tax the wealthy.

In 1909, President William Howard Taft proposed a 2% federal income tax on corporations, and Congress passed a provision for an income tax as part of a tariff bill. Despite initial opposition, the Sixteenth Amendment was ratified by the required number of states in 1913, and it formally took effect, marking a significant shift in how the federal government received funding.

Religious or moral grounds

The First Amendment to the United States Constitution states that citizens have the right to freedom of religion, and that the government cannot establish a state religion or prevent the free exercise of religion. However, this does not provide a right to refuse to pay income taxes on religious or moral grounds, even if the taxes are used to fund government programs that a taxpayer opposes. This has been affirmed in court cases such as Adams v. Commissioner and United States v. Ramsey.

In the United States, there is no church tax levied from citizens as the Constitution explicitly separates church and state. Churches are generally exempt from paying taxes, and the Supreme Court has held that this is constitutional under the Establishment Clause. The Establishment Clause prohibits the federal government and state governments from establishing a state religion or favouring one religion over another.

While churches are considered tax-exempt organisations in the US, they are still required to withhold payroll taxes from non-clergy employees. However, they are not required to withhold payroll taxes from clergy employees. Religious organisations are also not required to pay the Federal Unemployment Tax Act (FUTA) tax or state unemployment tax. The Tax Reform Act of 1984 allows a religious body to elect a special exemption from the employer's share of FICA taxes if it opposes such taxes on religious grounds.

In contrast, some countries do have a church tax, where members of certain Christian denominations are required to pay a tax to financially support churches and their operating costs. This is related to the concept of tithes and offerings. In some countries, people who are not members of a religious community are exempt from this tax, while in others, it is always levied. The money collected from church taxes is used to cover church-related expenses, such as funding institutions and paying ministers.

The Constitution of India includes Article 27, which states that no person shall be compelled to pay taxes specifically appropriated for the promotion or maintenance of any particular religion or religious denomination. This article prohibits the state from imposing taxes to raise funds for a specific religion, ensuring that public tax money is not used to support a particular religion in a secular country.

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Self-incrimination

The US Constitution grants Congress the authority to levy taxes for federal debts, common defence, and the general welfare. Article I, Section 8, Clause 1, also known as the Taxing Clause, outlines this power. However, the Constitution initially stated in Article I, Sections 2 and 9, that direct taxes could not be imposed on individuals and had to be based on the population of each state. This changed with the ratification of the Sixteenth Amendment, which specifically grants Congress the power to impose a direct income tax.

While the Constitution grants the federal government the power to tax, it also provides protections for citizens against self-incrimination. The Fifth Amendment states that individuals cannot be compelled to be a witness against themselves in a criminal case. This right has been interpreted to include protection from self-incrimination in tax filings. However, this does not give taxpayers the right to refuse to file income tax returns or provide financial information. The Supreme Court has ruled that taxpayers cannot draw a conjurer's circle and refuse to comply with tax laws based on blanket assertions of the Fifth Amendment privilege.

In United States v. Sullivan, the Supreme Court established that there is no constitutional right to refuse to file an income tax return based on the Fifth Amendment. The court affirmed that taxpayers must comply with the filing and reporting requirements of federal tax laws. Similarly, in United States v. Neff, the Ninth Circuit rejected a taxpayer's claim that their response to tax form questions would be self-incriminating, upholding their failure-to-file conviction.

To validly claim the privilege against self-incrimination, individuals must demonstrate a real and appreciable danger of self-incrimination. This means that they must show that answering specific questions would tend to incriminate them. In United States v. Schiff, the court held that the Fifth Amendment privilege does not immunize all witnesses from testifying. Only those who assert that answering a particular question would incriminate them are protected.

While the Fifth Amendment provides a crucial protection against self-incrimination, it does not exempt individuals from complying with tax laws or providing financial information on tax returns. The courts have consistently rejected arguments that tax laws violate the right against self-incrimination. These rulings uphold the government's authority to require citizens to pay taxes on their earnings while also protecting individuals' rights during legal proceedings.

Supreme Court rulings

The Sixteenth Amendment to the US Constitution, ratified in 1913, established Congress's right to impose a federal income tax. The amendment states:

> 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 US Supreme Court has made several rulings on the constitutionality of income tax laws and payroll taxes. In 1895, the Supreme Court declared the income tax to be null and void in a 5-4 decision, stating that the federal government had no right to directly tax individuals. This decision was based on the argument that only states could directly tax individuals. However, the Sixteenth Amendment was later enacted in 1913 to make income tax constitutional.

In Brushaber v. Union Pacific Railroad (1916), the Supreme Court ruled that the Sixteenth Amendment:

• Removes the requirement from the Pollock ruling that certain income taxes be apportioned among the states according to population;
• Does not violate the Fifth Amendment's prohibition against the government taking property without due process of law;
• Does not violate the requirement that indirect taxes be imposed with geographical uniformity.

In Commissioner v. Glenshaw Glass Co. (1955), the Supreme Court provided a modern understanding of "gross income" under the Sixteenth Amendment, stating that income taxes could be levied on "accessions to wealth, clearly realized, and over which the taxpayers have complete dominion".

In Flora v. United States (1960), the Supreme Court held that a taxpayer must pay the full tax assessment before being able to file a refund suit in district court.

In Rivas v. Commissioner (2016), the Supreme Court rejected the claim that an IRS levy violated the Fifth Amendment, stating that there is no constitutional right to refuse to file an income tax return based on the Fifth Amendment privilege against self-incrimination.

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

In Comptroller of Treasury of Md. v. Wynne (2015), the Supreme Court upheld the Internal Consistency Test, finding that Congress, not individual states, has the power to "regulate Commerce".

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