The Constitution of the United States, being the supreme law of the land, defines the powers granted by law to the Federal government. Since the objective of the Founders was to create a nation that operates under a limited government, it was important to them to define as precisely as possible not just the powers of the government, but the limitations to those powers. It is the job of the courts to evaluate new laws that apply or expand Congressional authority, and part of that duty is to ensure that there are clear limits to Congressional power, ie, they seek the Limiting Principle. Theoretically.
The tax laws of the United States, including Section 8 of Article 1 of the Constitution which permits the government to raise taxes in order “to pay the Debts and provide for the common Defence and general Welfare of the United States“, and the 16th Amendment ratified in 1913 which grants Congress the power to levy an income tax, do not address whether a citizen’s property in fact belongs to that citizen, since there is no Constitutional limit to how much of your money the government can claim. The Limiting Principle as implied in the various tax laws may apply to the means by which tax money may be raised and to the purposes for which tax money may be spent, but not on how much of your wealth the government may claim in taxes. Does taxation challenge the very concept of property rights?
If the government has a constitutional power to tax, and if there is no limit to how much it can tax, then theoretically it can tax away all of one’s wealth. We already know that the IRS has the power to levy fines on bank accounts which have not been properly reported through the FBAR requirement, and that these fines can be multiples of the entire value of the account. It therefore is theoretically possible that, not only could the IRS or the US govt. tax you at 100%, it could put a citizen into debt. And if the government has the power to essentially bankrupt a citizen, then for US citizens living abroad who have no recourse through the ballot box, a theory of a Limiting Principle becomes of vital importance.
So how much of your money is actually yours?
Well now we have the answer: it all belongs to the government. Ah – except for a deliberately unspecified “hunk” that belongs to you. And who is the financial oracle who has generously determined that you and I get to hang on to a “hunk” of our hard-earned cash? None other than Elizabeth Warren, the left’s new heroine, consultant to the wizards who wrote Dodd-Frank, which created the new and accountable-to-no-one commission on financial regulation, and who some believe is tailor made to run it.
This financial genius displayed a most peculiar misunderstanding of where wealth comes from when she said: “There is nobody in this country who got rich on his own. Nobody. You built a factory out there—good for you.
“ But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.
“But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
Let me repeat that : “GOD BLESS! KEEP A BIG HUNK OF IT!”
The underlying premise of taxation in the United States is that everything you make belongs to the government. The tax laws are made, and occasionally tweaked, to determine how much of your money you get to keep.
From Robert Higgs of the Independent Institute: “U.S. government officials in earlier times were sometimes unwilling to admit that people had a right to retain any of their earnings, and forthright in their declarations that everything people possessed really belonged to the government.
“Striking examples of such views may be found in the recently published book by Burton Folsom and Anita Folsom, FDR Goes to War. There the Folsoms present a meaty discussion of the congressional debate that occurred in 1943 in regard to bills eventually enacted in compromise form as the Current Tax Payment Act of 1943—the statute that, among other things, established income-tax withholding at the source. In that debate, the following statements were made in Congress:
“Rep. Emanuel Celler (D-N.Y.)—The government can at any time make income taxes as thumping big as the necessities of war require. Thus, if any plan does not raise enough money, taxes can at any time be increased. The government always has a moral if not actual lien on all our income. (p. 200, emphasis added)
“Sen. Happy Chandler (D-Ky.)—[A]ll of us owe the government; we owe it for everything we have—and that is the basis of obligation—and the government can take everything we have if the government needs it. . . . The government can assert its right to have all the taxes it needs for any purpose, either now or at any time in the future. (p. 200, emphasis added)
“Rep. Wilbur Mills (D-Ark.)—The public, with money in its pockets, will inevitably try to use this money to buy what it wants, what it may need. . . . [T]o check the forces making for inflation, we must direct our tax policy toward diverting an ever larger part of the funds of persons above subsistence levels into the Public Treasury. (p. 201, emphasis added)”
[Note in Wilbur Mills’ statement the outstanding display of ignorance at the belief that inflation is caused by people spending too much, the implied cure being to divert that money into government coffers so Congress can spend it.]
For expats in Canada facing unconscionable invasions of our personal and “foreign” financial dealings, Ms Warren’s jaw-dropping claim on other peoples’ money is particularly dumb-founding. Our response to this is perhaps along these lines: Ms Warren, laying aside the fact that property rights are essential to liberty and the survival of a free society of limited government, so that your statement is contrary to the spirit of the Constitution, I’ve already paid for the roads I travel – in Canada. I pay for the police force that protects me – in Canada. I’ve turned my life into something terrific – in Canada. So why the hell do your compatriots think I owe taxes to your government?
Robert Higgs follows up here: http://blog.independent.org/2012/01/06/why-your-dog-doesnt-own-your-entire-house-and-the-government-doesnt-either/ He discusses the application of Warren’s reasoning to the theory, long discredited, that anyone whose contribution to your earnings is essential therefore has a claim on everything you earn. “Of course, if the rulers can’t claim that they deserve everything you’ve earned by using this sort of bogus reasoning, they’ll surely come up with another equally bogus reason for doing what all rulers and their stooges seek to do—to plunder you to the fullest feasible extent.”
Thus dual citizens appear to be in the impossible position of possessing wealth that belongs in its entirety not just to one government, but two.
If there isn’t a Limiting Principle enshrined in the Constitution or in jurisprudence, there should be.
Your absolutely right, they DO have NO RIGHT to your money that you make in a foreign country, DIRECTLY through taxes, or INDIRECTLY through under-handed penalities. Petros, I think it’s good to use the lawmakers’ own words to challenge the whole issue of Citizenship-based taxation. I personally don’t think the FACTA is going away anytime soon, but maybe give in lesser filing requirements. (this wouldn’t change my desire to renounce though!)
I think most countries have resident-based tax schemes as a matter of national pride. They want their countries to be built on the backs of people who our proud to be citizens and residents of those countries. The US though will stoop to any level and scam a buck out of anyone they can. Very sad.
Thanks for a great post. Modern democracy is just a way to get somebody else to pay your bills.
You wrote that:
“It therefore is theoretically possible that, not only could the IRS or the US govt. tax you at 100%, it could put a citizen into debt. And if the government has the power to essentially bankrupt a citizen, then for US citizens living abroad who have no recourse through the ballot box, a theory of a Limiting Principle becomes of vital importance.”
A lot of this depends on the characterization. FBAR penalties are “fines”. What about the 8th amendment to the U.S. constitution that prohibits excessive fines?
If this has any validity then taxes need to be characterized as “fines on work”.
Really? Are you suggesting that NO government shouldl collect taxes from anyone? I don’t think the US government should be able to tax me, a Canadian born Canadian resident, who is accidently American, because my mother was a US citizen. I don’t use their roads, schools, fire depts, etc, but I have no problem with paying Canadian Provincial and local taxes, so I guess I agree with Elizapeth Warren.
That is your privilege. Many people share your view. But consider this: once you agree that it is acceptable in principle for the government to take your money without your consent, where, in principle, do you draw the line, either at how much of your money the government can take, or at what other actions the government may take against you without your consent? What is the Limiting Principle?