History of Tax Day

Tomorrow is Tax Day again.  That is the day which is the deadline to file an annual income tax return in the United States.  In honor of tax day, let's look at the history of tax rates.

The biggest thing that should be noted is that for most of the history of the Untied States, there was no income tax.  It is not an inevitable part of funding a government.  For an even longer period of more than 150 years, there was no or minimal income tax on the average person.

I chose two marginal rates to track.  The first is the hypothetical income of $10 million dollars which has been bandied about by politicians lately.  This group of "the rich" has often been the target for income taxes.  The other group at which I looked was those with a medium income rate.  One of the ways in which taxes were sold by politicians was that for the first couple of generations, the median earner paid little to no income tax.  The taxes were then raised with the justification of paying for the World Wars.  Taxes went up briefly after World War I and came down again for the average worker.  It went up again after World War II and did not come down significantly until 2018.  The income tax became a regular feature of middle class life.

The figures below are using inflation adjusted incomes.  For most of the period, $10 million dollars of income placed a person in the top bracket.  However, in some of the earlier years it didn't.  The biggest change in what median earners paid came in the 1950s.  Several things happened in that decade.  The main ones were that the income tax became the main source of federal funding in the 1950s.  The other is that household composition began to determine tax rate.  Rather than a single percentage based on income, there became a range of percentages paid based on factors like married or single, parents or childless. 

Here are the ranges throughout history:

                                $10,000,000 Income             Median Income

Before 1913            No Income tax                      No Income Tax

1913                        6%                                        No Income Tax

1920                        72%                                      8%

1930                        25%                                      1 1/2 %

1940                        74%                                      4%

1950                        91%                                      30%

1960                        91%                                      22%-26%

1970                        70%                                      22%-32%

1980                        70%                                      28%-49%

1990                        28%                                      28%

2000                        39.6%                                   15%-27.5%

2010                        35%                                      15%-25%

2018                        37%                                      12%-22%

Representative Amash Sponsors Fair Election Bill

Representative Justin Amash (R- MIch.)  introduced bill HR 1681 earlier this month.  The bill description sates, "To require States to impose the same ballot access rules on all candidates in a general congressional election held in the State without regard to whether or not the candidates are nominees of a political party..."  Currently, candidates for the Republican and Democratic parties get a myriad of advantages over other candidates in most states.  In many states, no candidates but those of the Republican and Democratic party have a reasonable chance of even getting their name listed on the ballot.   For example, no third party candidate has appeared on the ballot for U.S. House of Representatives in Georgia since its current ballot access laws were passed in 1943.

Hopefully this bill will pass and get rid of "two largest" laws that exist across the country.  "Two largest" laws are always which state that candidates of the two largest parties, as determined by voter registration or prior election performance, get all sorts of advantages over other candidates.  These range from ability to put future candidates on the ballot or preferential placement on the ballot to public funding. 

The bill has been referred to the House Committee on House Administration.  The bill can be tracked here:

H.R.1681: To require States to impose the same ballot access rules on all candidates

Court Rules That Delaware Must Allow Independent Judges

The Third Circuit Court of Appeals ruled that Delaware cannot require its judges to be members of a major political party (Adams v. Governor of Delaware, 18-1045). Delaware law stated that all Supreme Court Justices, plus all Superior and Chancery Court Judges must be members of the Republican or Democratic Parties. Delaware argued that this should be allowed because there were both Republican and Democratic judges.  The Third Circuit ruled that no state may hire anyone based on political affiliation.

One of the cornerstones of keeping the two party system in power is having partisan judges and elections officials.  It is difficult for independent or alternative candidates to get a fair shot at elections when the elections officials are members of an opposing party.  Add that the judges who hear their ballot discrimination cases are also partisan and it is little wonder as to why the two major parties control the election process.

Judge Julio Fuentes, who had the courage to write this decision as well as the judges who supported it, Theodore McKee and L. Felipe Restrepo should be applauded for making a decision outside of partisan affiliations. 

Supreme Court Rules Against Police Shakedowns

In a rare unanimous decision, the Supreme Court ruled that the practice by local governments of seizing property and using excessive fines to fund government operations was a violation of Eighth Amendment protections. Timbs v. Indiana

In this particular case, Indiana had taken a Range Rover (value about $42,000) from Timbs when he was accused of a minor drug charge.  This practice, known as civil forfeiture, has been used by law enforcement to confiscate billions of dollars worth of property from citizens.  Originally sold as a method to undermine the financial structures of large criminal organizations, in many jurisdictions this method is merely used to pad law enforcement coffers.  Some jurisdictions do not even require that formal charges be filed or a crime be proven in order to seize property.

In Mr. Timbs case, he did plead guilty.  However, the Supreme Court determined that taking the Land Rover was "grossly disproportionate to the gravity of Timb's offense." 

It appears that this case deals mainly with the amounts which may be seized rather than attacking the act of seizure itself.  Hopefully another case will make it to the court which protects the rights of people who have property seized who have not been charged with criminal acts.  So far all of these cases of which A Conscious Conservative is aware have been settled out of court at lower levels.  It will be interesting to see how states adjust their policies with regards to this ruling.   

The Payroll Deduction Scam

One of the biggest frauds of the income tax has been recently brought to light by changes in the tax code.  Because less money was withheld from many people's paychecks last year, people are getting smaller tax refunds.  Some are even owing taxes when they file.  The response to this in articles about the subject shows the complete ignorance on how the process works.  NPR had a February 14th headline of "Anger, Confusion Over Dwindling Tax Refunds.  Is Trump's Tax Plan To blame?"  The Worcester (MA) Telegram writes "Reduced tax refunds surprise Bay State taxpayers," on February 15th.  Some people are complaining that they are getting smaller refunds.  Others that owe say they do not have enough money to pay.

This is because the government of the United States has set up a scam.  Although the money goes to the government, it is taken out of paychecks by employers.  Typically the government takes more than is expected throughout the year.  Then, at the end of the year, people get a refund of the overpayment.  This sets up the government as one giant gift giver.  The IRS sends out millions of checks each spring.  As can be seen by the reaction of people who aren't getting checks this year, this is seen as free money.  Most don't realize that they have paid too much throughout the year. 

There is a simple way to stop this fraud.  Eliminate payroll withholding.  This would be a boon to businesses small and large who spend an inordinate amount of time collecting money on behalf of the federal and state governments.  Having people send a payment on a regular basis would ingrain in them how much of their money is actually being taken.  It would also dissuade any notion that the government is in the business of handing out checks each spring.

San Francisco Fed President Ponders Permanent Easing

After the financial crisis of 2008, the Federal Reserve began the controversial practice of Quantitative Easing .  The Fed used bonds to rapidly increase the money supply.  This was justified because the economy was supposedly in a time of unprecedented distress and poised for collapse.

Both Reuters and Bloomberg are now reporting that San Francisco Fed President Mary Daly is talking about making Quantitative Easing a permanent program.  Although she spoke with the usual timidity of a Federal Reserve official, Daly admitted that more frequent use of Easing was being discussed.

There are two main problems that can be caused by this intervention in the economy.  The first is that flooding the markets with money can cause horrible inflation.  Since this inflation is related to easy money rather than economic growth, it can become the dreaded stagflation.  In stagflation, prices rise but wages remain stagnant and unemployment can increase.  The other problem is that inflation lowers personal savings rates and investment by individuals.  When money is becoming less valuable by the day people spend their money before the prices go up.  When banks have easy money they can lend at very low interest rates and less stringent underwriting.  That pushes private lenders out of the market.  The low interest environment is especially hard on the retired which rely on CDs and bonds for income as well as pension funds which rely on a low risk, stable lending portfolio for sure and steady returns.

We can hope that those running The Fed have more sense than to make Quantitative Easing a mainstay of intervention.  However , recent decades have shown that decisions are often made more to benefit the member banks and the stock market than the people of the United States.  The market rallied moments after Daly's statements were released.  We will have to wait and see.

Law Enforcement or Simply Theft?

The Greenville News (Greenville South Carolina) recently did an investigation of property seizure by South Carolina police agencies TAKEN: How police departments make millions by seizing property.)  They found that "Police are systematically seizing cash and property... netting millions of dollars each year."  They came to the conclusion that "South Carolina law enforcement profits" from these seizures.

How does this happen in the United States?  The Fourth Amendment clearly states that "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probably cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized."  Because of the profits involved, states have been playing fast and loose with this definition of "probable cause."  Many use the standard of any suspicion that a crime might be committed.  Here is a sample from the North Dakota Century Code (29-31.1)    "Forfeiture is a civil proceeding not dependent upon a prosecution for, or conviction of, a criminal offense..."  Since it is a civil proceeding, many of the important protections against taking of personal property are absent including guilt beyond a reasonable doubt.  

It is time for citizens to demand a stop to this practice.  Seizing ill gotten gains from individuals who have been CONVICTED of a crime can be a valuable law enforcement tool.  Allowing police to take property on suspicion is merely sanctioned armed robbery.