The personal exemption and 'inflation tax'

By Michael Nedderman

Have you ever wondered why the federal government allows a personal exemption from gross income, currently about $4,000? Is it a gift from our beneficent government, or is there a reason for it?

The idea of a personal exemption has been an integral part of the income tax since it was first proposed in 1909 as an amendment to our Constitution, becoming the Sixteenth Amendment in 1913. In the same breath with which legislators advocated the adoption of an income tax, there always followed, "… we would of course provide an exemption" because, it was reasoned, taxing the amount of the personal exemption would cause an injustice.

When debating the first income tax law in 1913, Sen. Albert Cummings provided the reasons for the personal exemption:

"There is a higher duty that rests upon every citizen than the duty to pay taxes or contribute to the expenses of his government. If our government is to continue and our institutions endure, there is one duty which every citizen ought to perform, and perform well, that, in my judgment, stands high above the duty of contributing to organized society in the way of taxes. That duty is to be a good citizen; it is to be moral and upright and fairly prosperous. That duty is, if he be the head of a family, to educate the family, and to train it and prepare it to take a useful place in a country like ours. My limit upon taxation is fixed by that consideration. I do not believe that an income tax should be levied upon any incomes fairly necessary to enable the citizen to discharge the duties of citizenship, to clothe himself and feed himself – to clothe himself well and feed himself bountifully – to give to all those who are dependent upon him every fair and reasonable opportunity so to equip themselves that they can as they come into maturity discharge their duties with fidelity and intelligence. Our country absolutely depends on the performance of this duty on the part of the citizen.

"It is unnecessary for me to say here just where the taxable limit is. I am satisfied with the limit of this bill. I do not think it ought to be much less in the beginning, at any rate; but, whatever it is, my standard would be the amount that would enable a man properly to care for himself and for his family and fit all those who depend upon him to discharge the duties of citizens of this country as those duties ought to be discharged." [Congressional Record, Vol. 50, page 3817]

The personal exemption that year was $3,000 single and 4,000 married when "the vast majority of American families live[d] on $500 or less per year." [Congressional Record (1909), Vol. 44, page 1962]

An equivalent exemption in today's highly depreciated "dollars" would be $75,000 to $100,000. See usinflationcalculator.com. Even when the personal exemption was lowered to $1,000 single and $2,000 married as a war measure in 1917, it was still quadruple what the ordinary worker used to support his entire large family.

As Sen. Joseph Bailey (Texas) was arguing for SJR 40 in 1909, he made the point five times on one page that this tax on income should not and would not do what today's income tax does: "tax a man for trying to make a living for his family [which] is such patent and gross injustice that it should deter any legislature from perpetrating it." [Congressional Record, Vol. 44, pg. 1702] Would he advocate a tax that did what he opposed: a tax that "… cannot be defended in any forum of conscience or of common sense"? Ibid.

It is clear that Congress had no intention of interfering with the "higher duty that rests upon every citizen" by taxing "the amount that would enable a man properly to care for himself and for his family" because they understood that "our country absolutely depends upon the performance of this duty on the part of the citizen."

The sacred nature of the family was universally understood in 1913 because the rationale for exempting it from taxation was exactly the same for exempting churches and state governments: because "the power to tax involves the power to destroy'" (Chief Justice John Marshall). Religion and the family are to be protected from the awesome power of government because they are essential for human perpetuation and liberty, and because each, in fact, is a form of government that must be kept outside of the taxing jurisdiction of the federal government – sovereigns don't tax each other under our system of government.

We seem to have forgotten that the family is the most basic form of government without which none of the others is possible, as Sen. Cummings so eloquently informed us.

So what happened? Why do we permit individuals and the family to be debilitated by an income tax made lethal by the unconstitutional "inflation tax" especially in light of the Constitution’s promise to "establish justice" in its preamble?

The income tax makes sense as applied to businesses, which are only taxed on net profit or net income, which, after expenses, is a fraction of gross income. But where is the profit in the irreplaceable hour you trade for a few bucks? None, of course, because it was your "capital investment" in a self-evidently quid pro quo transaction!

Understanding the noble justification of the personal exemption presented here, it is clear why there was initially no provision for families to deduct most expenses because government doesn't even have the right to tax the family in its essential needs! Congress' weak efforts lately to index the personal exemption to the theft known as "inflation" is a joke – it is $4,000 today when the median income for a family of four is about $50,000! But even the gamesmanship of the currently proposed tax reform is woefully inadequate and, most significantly, fails to acknowledge the sanctity and actual sovereignty of the family which is the real reason it was exempted in those early tax laws.

The personal exemption should be $50,000 to $90,000!

The unconstitutional "inflation tax" has corrupted the righteous intent of the income tax and, today, is attacking the family like a metastasized cancer. The corruption of our money and the loss of respect for the family has effectively reversed the "polarity" of a person's moral obligation, making fealty to government more important than the obligation to one's family.

Shame on us.

Michael Nedderman is a California based writer and can be reached at [email protected].