Tax Plan

[ashlynne39]

Ok, something I'm seeing some people I know to be Hendrickson followers arguing now is whether Herman Cain's 999 plan is Constitutional. I'm not a tax lawyer but I recognize at least some parts of their arguments to be inaccurate statements of law. I just don't know enough about tax law to make a judgment on the rest of it. I don't really have an opinion about Cain. I just always start paying attention when I see tax protestors or sovereign citizens expounding on what the law is.

Here is a link to Cain's tax plan: http://www.hermancain.com/999plan

Here is the argument I'm seeing from the tax protestors:

For any candidate to support a fair tax, or flat tax, or national sales tax, or consumption tax or VAT tax, it demonstrates that they clearly either do not know the Constitution or disregard it with wild abandon. Article 1, Section 9, Clause 4 is quite specific about how direct taxes will be laid. In no interpretation of the Constitution would any such tax be legal! Those who support such schemes obviously do not support the thinking of the founding fathers. Article 1, Section 9, clause 4 has never been repealed. Even the 16th Amendment did not repeal it causing the supreme court to declare that the 16th conferred no new power of taxation upon the Congress.

[Famspear]

For any candidate to support a fair tax, or flat tax, or national sales tax, or consumption tax or VAT tax, it demonstrates that they clearly either do not know the Constitution or disregard it with wild abandon. Article 1, Section 9, Clause 4 is quite specific about how direct taxes will be laid. In no interpretation of the Constitution would any such tax be legal! Those who support such schemes obviously do not support the thinking of the founding fathers. Article 1, Section 9, clause 4 has never been repealed. Even the 16th Amendment did not repeal it causing the supreme court to declare that the 16th conferred no new power of taxation upon the Congress.

I've seen this frivolous idiocy a gazillion times.

It is incorrect.

This is the usual twaddle, demonstrating that the protesters who repeat this stuff understand neither Article 1, Section 9, Clause 4 nor the Sixteeth Amendment nor the thinking of the Founding Fathers. There is nothing in these provisions that would prohibit any kind of income tax.

A national sales tax or a consumption tax or a value added tax (VAT) might have some constitutional problems if such taxes could be considered taxes on exports from a state (which are prohibited by the Constitution).

All these taxes - the income taxes, the sales taxes, etc. - are (or would be) indirect taxes (though a few courts have referred to the federal income tax as a "direct tax"). The main constitutional restriction on indirect taxes is that they must be geographically uniform. That is, such a tax cannot be validly imposed, say, "just in New Jersey and Montana."

[LPC]

Here is the argument I'm seeing from the tax protestors:

For any candidate to support a fair tax, or flat tax, or national sales tax, or consumption tax or VAT tax, it demonstrates that they clearly either do not know the Constitution or disregard it with wild abandon. Article 1, Section 9, Clause 4 is quite specific about how direct taxes will be laid. In no interpretation of the Constitution would any such tax be legal! Those who support such schemes obviously do not support the thinking of the founding fathers. Article 1, Section 9, clause 4 has never been repealed. Even the 16th Amendment did not repeal it causing the supreme court to declare that the 16th conferred no new power of taxation upon the Congress.

I don't want to rehash the entire "is an income tax a 'direct tax'" argument, which should be entirely academic at this point, but what you've quoted above is incoherent in at least two ways:

1. I don't know of any historical or legal authority for the proposition that a sales tax could be a "direct tax" within the meaning of the Constitution. A sales tax would seem to be entirely within the classical meaning of an "excise" (or "indirect" tax) which must only be uniform throughout the states.

2. The idea that the apportionment requirement of Article I, section 9, clause 4, continues to apply to income taxes is absurd, because it would completely contradict the plain language of the 16th Amendment.

Bottom line: I don't see anything in Herman Cain's 9-9-9 proposal that raises any significant constitutional issue. It's completely impractical and makes no economic sense, but those are different issues.

[Cpt Banjo]

1. I don't know of any historical or legal authority for the proposition that a sales tax could be a "direct tax" within the meaning of the Constitution. A sales tax would seem to be entirely within the classical meaning of an "excise" (or "indirect" tax) which must only be uniform throughout the states.

There is dictum in Nicol v. Ames, 173 U.S. 509 (1899) that suggets that a general sales tax would be a direct tax:

A tax upon the privilege of selling property at the exchange, and of thus using the facilities there offered in accomplishing the sale, differs radically from a tax upon every sale made in any place. The latter tax is really and practically upon property. It takes no notice of any kind of privilege or facility, and the fact of a sale is alone regarded. Although not created by government, this privilege or facility in effecting a sale at an exchange is so distinct and definite in its character, and constitutes so clear and plain a difference from a sale elsewhere, as to create a reasonable and substantial ground for classification and for taxation when wimilar sales at other places are untaxed. A sale at an exchange differs from a sale made at a man's private office or on his farm, or by a partnership, because, although the subject- matter of the sale may be the same in each case, there are at an exchange certain advantages, in the way of finding a market, obtaining a price, the saving of time, and in the security of payment, and other matters, which are more easily obtained there than at an office or upon a farm. To accomplish a sale at one's farm or house or office might, and probably would, occupy a great deal of time, in finding a customer, bringing him to the spot, and agreeing on a price. All this can be done at an exchange in the very shortest time, and at the least inconvenience. The market is there, and all that is necessary is to send the commodity. Although a sale is the result in each case, and the thing sold may be of the same kind, the difference exists in the means and facilities for accomplishing such sale; and those means and facilities there is no reason for saying may not be taxed, unless all sales are taxed, whether the facilities be used or not. 173 U.S. at 521-522

Of course, a sales tax is not a tax on the property being sold, but an excise upon the transfer of title to the property, and it's not necessary that anything beyond the sale itself (such as the existence of an exchange as in the Nicol case) be involved.

[Dr. Caligari]

Of course, a sales tax is not a tax on the property being sold, but an excise upon the transfer of title to the property, and it's not necessary that anything beyond the sale itself (such as the existence of an exchange as in the Nicol case) be involved.

If the gift tax and the inheritance tax have both been upheld as excises, why should a sales tax be any different?

[Cpt Banjo]

If the gift tax and the inheritance tax have both been upheld as excises, why should a sales tax be any different?

It wouldn't -- that's why the Nicol dictum doesn't make sense, especially since the case was decided just one year before the Court upheld the validity of the estate tax as an excise in Knowlton v. Moore, 178 U.S. 41 (1900). It is of interest that Justice Peckham, who wrote the Nicol opinion, didn't participate in Knowlton.

Maybe the dictum can be explained by the fact that while taxes on the transmission of property at death have a long history, the first broad-based sales tax in the U.S. didn't arrive until 1930.

[notorial dissent]

It seems like they trot this pony out and show it off about every other election or so and then it goes back out to pasture until someone else needs a show pony that won't go anywhere. They usually comb it a little differently each time, but is still pretty much the same old moth eaten nag each time.