Is a Progressive Tax Constitutional?
By Andrew Schwartz | Friday, October 7th, 2011 | Catch-All, Economics, PolicyCross-posted at the American Thinker:
So much has been made of wealthier citizens paying their “fair share.” Much of the argument against this sort of rhetoric has focused on why we shouldn’t raise taxes on the highest tax bracket, or why we shouldn’t create another tax bracket. But one argument that is missing is whether or not such a system of taxation is legal at all.
I don’t intend to go into a history of progressive taxation (the colonial Puritans used one, too) or of the income tax and the 16th Amendment. These are irrelevant to the question: Is it just for the government to protect a greater proportion of property of one class than that of another?
Under our current system, one man may earn $1 from manufacturing a product and be taxed 25 cents of that profit, while another man may make a similar product of better quality, earn $2 from his industry and genius, and be taxed $1 from the profit. Does the latter person receive equal protection of the laws?
The 14th Amendment states that “[n]o State shall … deprive any person of life, liberty, or property, without due process of law.” Fair enough so far. Governments are instituted among men to secure these rights, and to maintain this government, the citizen-body consents to grant a portion of their property in return for their security. This grant, by itself, may be flat or progressive. But the clause that follows elaborates: “nor [shall any State] deny to any person within its jurisdiction the equal protection of the laws.”
Firstly, what is protection of the laws? All legislation must be compatible with the fundamental law of the United States, the Constitution. Therefore, all protective laws must comply with rights guaranteed in that document. There are few, with the most important among them being life, liberty, and property.
Secondly, what is property? The American idea of property, in the Constitution, is derived directly from John Locke. His definition is clear:
[E]very man has a “property” in his own “person.” This nobody has any right to but himself. The ‘labour’ of his body and the ‘work’ of his hands, we may say, are properly his. Whatsoever, then, he removes out of the state that Nature hath provided and left it in, he hath mixed his labour with it, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state Nature placed it in, it hath by this labour something annexed to it that excludes the common right of other men.
Not only does property include an individual’s labor — that is, self-propriety — but it includes the fruits of that labor as well. Modernly, we associate property with real capital or estate, but this is ascertained only through a proprietary medium, called “money.” Money, then, is individual property, and it must be protected as equally as a person’s exercise of liberty and life.
What shall we say, then? Shall we continue to accept that Congress may determine that one group of individuals’ property deserves less protection than another? For if all property originally and rightly belongs to the individual, then that which is granted publicly for the preservation of existence and society is no longer under protection, but is instead used for protection. That remaining property which the individual has not granted must still be protected.
But for the government to declare that they will protect only 50% of an individual’s property within one class, but for another class declaring that 75%, 85%, 95%, or even 110% of their property will be protected, is not only unequal protection — it is logically equivalent to an economic bill of attainder. (The 110% applies to those who ultimately pay no income tax, but still receive a “refund.”)
The progressive taxation system necessarily places individuals into a classified society, which varies not by color, sex, or religion, but by success. In at least one aspect, the poor receive a greater protection of their civil rights (which include property) than do the wealthy. And since the numbers of the non-wealthy vastly exceed the numbers of the wealthy, the former have been allowed to democratically violate the latter’s right to an equal protection of property.
Justice John Harlan, the lone dissenter in the infamous Plessy v. Ferguson ruling, understood that “[t]here is no caste here. Our constitution is color-blind, and neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law. The humblest is the peer of the most powerful.” And by equal extension, the most powerful ought to be the peer of the humblest, and receive the same protection. Harlan might as easily have said that our Constitution is wage-blind.
To deny one class equal protection of their property because of their success is logically no different from denying a different class an equal protection of liberty because of their color.
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About the author
Andrew Schwartz is a historian from Old Dominion University, where, despite his conservative arguments in liberal academia, he graduated Summa Cum Laude. His focus as a historian is on Colonial and Revolutionary American political and intellectual history. His focus on politics is rational conservatism. He has written on politics and history for various blogs for about five years.
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22 Responses to "Is a Progressive Tax Constitutional?"
An absolutely compelling argument. I was almost looking for “God forbid.” in the question “What shall we say then? Shall we continue to accept that Congress may determine that one group of individuals’ property deserves less protection than another?”
We have been socialized to the point where we are not even sure if we own anything or not, or should own anything. Owning anything of value seems to carry with it a stigma of evil, and only when personal property is dispersed to the welfare of all is that thing worthy of being called good.
Thank you for reminding us that there is a reward, however humble or great, for the efforts of our labour and that we are entitled to it. What we do with it after we see to our needs and those of our family may well be to help others, which we may be more inclined to do if the government weren’t already in that extremely dubious business of nursemaiding. Folks receiving help locally would be more accountable. The faceless government requires no accountability or responsibility.
Romans 6 was definitely on my mind while writing that!
Actually, your Locke quote means that the income tax and the estate tax are both immoral.
Ah…were that it was true. Don’t take my response as any kind of support for a progressive income tax system, but the point you’re missing is the marginal nature of the tax system.
What you’ve written would be 100% correct if there were absolute tax brackets – that is, if a worker earning $50,000 was taxed at 25% and the worker earning $60,000 was taxed at 50%. The former would pay $12,500 in taxes (and be left with $37,500), the latter would pay $30,000 in taxes (and be left with $30,000). That would be unfair and unjust and unequal protection, exactly in line with your reasoning.
But the fact that we have marginal tax rates – the first $8,500 is taxed at 10%; the next $26,000 at 15%, and so on – is what supposedly makes the progressive income tax Constitutional. Everybody pays a 10% tax on their first $1,000 of income. Equal protection. Everybody pays a 15% tax on their 20th $1,000 of income. Equal protection. Everybody pays a 33% tax on their 250th $1,000 of income. Equal protection. The fact that very few workers ever see that 250th $1,000 of income ($250,000) has no bearing on the equal protection of the progressive income tax.
The questions which really need to be asked are about how the Federal Government doles out all this money they’re taking in, whether it is spending our money on wars or WIC or bridges to nowhere or bank bailouts or Solyndra. The spending addiction in DC was summarized by a Congressman – “Compromise has a unique definition here – everybody gets everything they want”. The spending and the entitlements and the loopholes and the lining the pockets of your political allies is what needs to be addressed.
Though the opponents won’t admit it, the FairTax is a progressive tax system. The more you spend on new stuff, the more taxes you pay. Make all your purchases at the thrift store and you actually come out ahead of the game. A progressive tax system which involves the element of *choosing* to pay higher taxes is something everybody – even Warren Buffett *and* his secretary – should love.
Very well written, Brad. As has been said, we don’t have a tax problem in this country, we have a spending problem. And the lion’s share of that spending problem is entitlements. We have allowed our private sector employers to out-source retirement and medical insurance to Social Security and Medicare, programs that were intended to be social safety nets but that are now the retirement plan for the middle class. Meanwhile, our corporate employers pay the highest corporate incomes taxes in the world. The net effect of this has been to make the Federal government, not private enterprise employers, the purveyor of health insurance and other retirement benefits.
Here’s an idea: eliminate corporate income tax and require all employers to provide defined-benefit pensions. Take the Federal government out of the loop. And, best of all, let the middle class benefit from their actual employment performance and not from some egalitarian benefits model that ignores their individual contributions to the economy. Then, let minimal Social Security and Medicare coverage provide the safety net for those who for whatever reasons would otherwise fall into poverty–as it was originally intended.
The simple answer is yes.
Article I Section 8 gives Congress the power to tax and spend for the general welfare. The 16th Amendment and Supreme Court precedent makes it clear that any tax that raises revenue, no matter how it does so, is Consitutional. The equal protection clause of the 14th Amendment only applies to state action, not federal action.
We won’t win this argument by appealing to the Constitution. We win it by making people understand that punishing success us dumb.
I agree with the premise of the posting, however when you get to the point of saying that “money” is “individual property”, you are moving off base. “Money” is not an “individual property”, it is a medium of exchange, a measure of value and used as a means of payment but it is not your individual property. Money is the “property” of the government who issues the notes and coinage that quantify the “wealth”, which really is the “property” of the individual. Many who have tried to tried increase their “individual property” holdings by counterfeiting money have direct experience in prisoner reeducation facilities with how our government feels about their “money”.
Tim J,
That is absolutely the dumbest comment you have ever posted. “Money” is not individual property but is always the property of the government? Really? Then when you sell land for cash, coinage, or gold, then the value of the land transfers not to you but to the government? And all retirement wealth that is held in investment accounts in the form of cash, bonds, and certificates is not your property but that of the government? Also, there is a difference between possessing money and creating counterfeit money, something that most people with a high school education understand.
Try again, junior. You don’t seem to have thought this through at all.
@Brad: That is an interesting perspective, but I don’t think it changes the argument. If my first dollar is taxed at 50%, and my second dollar is taxed at 100% then that is not an equal protection of property. If a disproportionate amount of the fruits of my labor beyond a certain value, which is determined by the state, is subject to less (or no) protection, then it is not equal at all. The whole idea of marginal tax brackets bothers me (although I do prefer them to absolute brackets). For an interesting 5th Amendment argument, see Calvin R. Massey, “Takings and Progressive Rate Taxation,” in Harvard Journal of Law and Public Policy, 20 (1996), 85ff, where he argues that marginal increments are a permanent disposession and therefore violate an individual’s right to private property without just compensation (I disagree with the fundamental premise of taxation being a “taking,” however).
But to continue, I agree that the fundamental issue in front of us is a spending issue. The purpose of this was not to propose a “flat tax” (although I see how that is the implied “solution” to my question); instead it was to instigate debate on the matter, perhaps offering a different perspective that has not been considered.
@Simple Answer: Using your logic, I can justly argue that the First Amendment ONLY applies to Congress. Do you really want to go down that road? As for Supreme Court precedent, Plessy v. Ferguson made it clear that segregation was fine. Precedent and Case Law cannot be binding and irrefutable. It has its place, don’t get me wrong, but it cannot eternally be the final arbiter.
@Tim J: Ah.. Nevermind, HisRoc said everything pretty well.
Andrew,
Brad put forth a correct perspective because it is a fact. The scenario you put forth is a hypothetical that will ever happen.
Your first dollar isn’t taxed 50%, never has, and never will be. Your second Dollar never has nor never will be taxed 100%. You’re trying to put forth an irrelevant hypothetical situation. Hell, even the Scandinavian countries only pay taxes in the 40% range.
Maybe this will help you understand it a bit:
10% of the first $8,500
+15% of $8,501 to $34,500
+25% of $34,501 to $83,600
+28% of $83,601 to $174,400
+33% of $174,401 to $379,150
+35% of $379,151 or more
Example:
You make $50,000 a year; I make $40,000; Shaun makes $20,000.
My Federal income taxes are (10%*$8,500)+(15%*($34,500-$8,500))+(25%*($40,000-$34,500)) or $850+$3900+$1375 or $6125 a year on $40,000 in income.
Your Federal income taxes are (10%*$8,500)+(15%*($34,500-$8,500)) + (25%*($50,000-$34,500)) or $850+$3900+$3875 or $8625 a year on $50,000 in income.
Shaun’s Federal income taxes are (10%*$8,500)+(15%*($20,000-$8,500)) or $850+$1725 of $2575 on $20,000 in income.
We’re all taxed the same at any given point in the income ladder.
ToR, believe me, I understand the argument, but it does not change that accrued property of a certain value–or success of a certain value–is protected less simply because of the person who has accumulated it.
I hope you are correct in that my “second dollar” will never be taxed at 100%.
Roc, your ignorance preceeds you, and lay off the booze for a while and then try reading again.
Andrew, not to repeat myself (ToR did a fine job of answering your questions about my post), but the issue you can’t connect is that there IS equal protection of taxpayers – each taxpayer is charged the same tax on the first $1,000 and the 250th $1,000.
There is no explaining the fact that the Federal Government treats your 83,601st dollar of income differently than your 83,599th. That is the crux of the progressive income tax system, and a huge dis-incentive to income productivity, but not unconstitutional. The Constitution promises equal protection of citizens, not equal protection of dollars.
If you allow me to continue your hypothesis logically, then the mortgage interest deduction is providing unequal protection to homeowners when compared to those not lucky enough to pay mortgage interest. The intricacies of the income tax system are exactly what’s wrong with it.
HisRoc, I can’t fathom the difficulty of your suggestion about requiring employers to provide defined-benefit pensions. How can you possibly solve a bloated and abused federal program by creating what is sure to be a bloated and abused private program? Shades of health care reform…
Tim J, yeah, what they said.
Brad,
Because a “bloated and abused” Federal program is not going to be nearly as bloated and abused as a private sector program. Can you imagine a private sector company paying out over $200M in fraudulent health care claims as was just revealed in south Florida in Medicare fraud this week? Even GM would take notice of $200M going out the door for group therapy of Alzheimer’s patients. Perhaps if government auditors were not preoccupied with Social Security and Medicare fraud then they could concentrate on why the IRS is sending billions of dollars in tax refund checks to people who have been in prison for the last 5-20 years.
@Brad: Firstly, thank you for the civil discussion. It is nice to return here after reading many of the comments from protestors on my most recent post on “Occupy Norfolk.”
I have to disagree with your assertion that the Constitution guarantees equal protection of citizens, rather than property. “Equal protection of the laws” in regards to life, liberty, and property, is the clause. And since property is granted (not taken), that proportion which remains, no matter what value, must be protected equally.
Nevertheless, I read several scholarly journals on this subject before posting this, and none of them offered the perspective you did. I think the fundamental disagreement comes from whether or not taxes are taken or granted. It is, in my opinion, not equal protection, if a less-wealthy class that outnumbers a more-wealthy class may vote to grant a disproportionate amount of property held by the latter.
As to the mortgage interest deduction, I believe I agree with your logical conclusion.
Thanks for the food for thought!
Andrew-interesting discussion though I disagree with your conclusion. Per your post “nor [shall any State] deny to any person within its jurisdiction the equal protection of the laws.” The part about property was only in the preceding clause which was that “no State should deprive any person of life, liberty or property without due process of the law.” The intention of this (looking at the context of the time period in which it was passed) was to protect the civil rights of minorites.
THat being said I can think of one place in the income tax code which might be unconsitutional-the phaseout of itemized deductions and personal exemptions for those earning a certain amount.
Perhapse the real question in a day and age where American Citizens are assassinated by our government, where wars are fought without congressional approval, where laws are enacted through executive authority to sidestep congress..
When did the constitution start to matter again?
But hey.. I agree with your premise. Class warfare is ugly and has no place in our tax code.
An interesting perspective from Tom Mullen: “The Constitution Does Not Protect Our Property”
http://thomasmullen.blogspot.com/2010/03/constituiton-does-not-protect-our.html
“By “property,” I do not mean exclusively or even primarily land ownership, although land ownership is one form of property. By “property,” I mean all that an individual rightfully owns, including his mind, body, labor, and the fruits of his labor. It is specifically the right to the fruits of one’s labor that the Constitution fails entirely to protect. In fact, it makes no attempt to do so whatsoever.
In the Constitution itself, the word “property” appears only once, and that is in reference to property owned by the federal government (an inauspicious start). Nowhere does it make any mention of property owned by the citizens.”
Ok… First of all, the “Constitution itself” includes the Bill of Rights and the rest of the Amendments. It’s not like they are an appendix–they are amendments that clarify or add on to an existing document. Therefore, in the 5th and 14th Amendments, the Constitution DOES mention property and the government’s responsibility not to infringe upon it without due process and to provide it equal protection.
Secondly, this guy is wrong about the Constitution not protecting any rights other than habeus corpus. The First Amendment protects free expression from the federal government (which has been extended to any government); likewise for the second amendment for the right to bear arms. What the Constitution doesn’t do is GRANT rights to individuals (except while a citizen is under the arrest of government, e.g., habeus corpus). But it most certainly protects and guarantees the exercise of these rights without federal intervention.
Anything else?
@SE VA MWC Alum: Are you saying that property is not a Civil Right? If you say it’s not, I don’t think we will agree. If it is, then those whose property is less protected are certainly a minority, and therefore even your interpretation is applicable.
Didn’t he spend about 3 paragraphs talking about how the Bill of Rights and how the Amendments have protected us over our history? And his point that “they have proven ineffective against the slow, deliberate growth of government power under ordinary circumstances, when the specific conditions described in those amendments do not exist. This is primarily due to the absence of protection, either in the Constitution or in any subsequent amendment, of the most important right of all: property.”
So relative to “property”, the Bill of Rights hasn’t changed, the Constitution hasn’t changed, but the Courts have rendered interpretations that intrude on the original protections as stated, based on conditions of a later time. Remember Kelo v. City of New London in 2005 that involved local government using the 5th Amendment to take private property and give it to a “private” corporation?
“As for the remaining protections of property in the Constitution and Bill of Rights, there are none.”
and
“This is primarily due to the absence of protection, either in the Constitution or in any subsequent amendment, of the most important right of all: property.”
This guy apparently forgot to read the 14th Amendment.
Anyway, if we’re going to base the protection of our rights on precedent and case law, then the conservative movement has no hope. Precedent, interpretations, and Supreme Court decisions are not binding, otherwise we would still be segregated.
As for the general philosophy of his article, I don’t find it that strange that a disciple of Lew Rockwell views every form of taxation as the government TAKING property (hence his Red Herring in applying the 5th Amendment to taxation)… If you really want to understand the principle of taxation as it applied to the colonies and the Revolutionary states, study English Common Law. It’s all there.
Consider this quote by Lord Camden, Lord Chancellor of England in 1766: “Whatever is a man’s own is absolutely his own; and no man has a right to take it from him without his consent, either expressed by himself or his representative—Whoever attempts to do it, attempts an injury: Whoever does it, commits a ROBBERY: He throws down the distinction between liberty and slavery”
If we claim that government takes our property without our consent, we consider ourselves slaves.
John Locke: The supreme power is not, nor can possibly be arbitrary, over the lives and fortunes of the people—The supreme power cannot take from any man any part of his property without his own consent. For the preservation of property being the end of government, and that for which men enter into society; it necessarily supposes and requires that the people should have property, without which they must be supposed to lose that by entering into society, which was the end for which they entered into it. Men therefore in society having property, they have such a right to the goods which by the law of the community are theirs, that no body hat a right to take their substance or any part of it from them without their consent. Without this, they have no property at all: For I have truly no property in that, which another can by right take from me when he pleases, against my consent
Samuel Adams recognized this, writing to his agent in London in 1765: “The primary, absolute, natural Rights of Englishmen as frequently declared in Acts of Parliament from Magna Charta to this Day are, Personal Security, Personal Liberty, and Private Property, and to these Rights the Colonists are intitled by Charters, by Common Law and by Acts of Parliament.”
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