The Power to Tax


By ROBERT L. DOUGHTON, Congressman from North Carolina

Delivered before House of Representatives, Washington, D. C, February 23, 1944

Vital Speeches of the Day, Vol. X, pp. 295-297.

OF the powers given to the Federal government in the Constitution none is so carefully guarded as the taxing power. A brief glance at history tells us why the founding fathers placed these restraints and safeguards around the power of the Federal government to levy taxes. In the Old World taxation had been the instrument most often used to abuse and grind down a helpless people.

Taxation imposed and controlled by persons not subject to the will of those taxed was the direct cause of our Declaration of Independence and the American Revolution. Our forefathers, remembering the injustices of Old-World taxation and stinging under the lash of taxation without representation, took every precaution that unbridled and unjustifiable taxation could not prevail in these United States and that taxation could not fall into the control of any person not responsible to the people. Taxation without representation caused the patriots of Boston to rebel, and under the leadership of Washington they and other patriotic Americans threw off the yoke or tyranny and established a democratic government surpassed nowhere in the world today. Are we the representatives of 130.000,000 Americans, ready to return to the order and place the taxing power in the hands of, or to be dictated by, a small group responsible to the Executive, and to the Executive alone, or are we to keep that power in the hands of the American people, to be exercised through duly elected representatives of their own choosing?

When the people, in the constitution, gave the taxing power to the Congress of the United States, they clearly specified that all taxation should be uniform throughout the United States; that direct taxes should be assessed in proportion to the population and, above all, they required that all tax measures should originate in the House of Representatives. Clearly, the people were determined to keep the taxing power under the greatest restraint compatible with the necessities of the Republic and to place it, to as great a degree as possible, in the hands of their representatives who were most responsible and amenable to the will of the people, namely: the House of Representatives. Under this rule the members of the House who originate bad tax legislation can be removed, at least within two years.

Thus, no single power in the entire Constitution is so clearly and completely placed in the hands of the Congress, and no one examining history impartially can doubt that itis the will of the people that the Congress of the United States should determine the amount of tax revenue to be secured and the sources and methods of procuring this revenue.

So far as I know, no President in the history of our nation has violated this tradition or attempted to thwart this basic concept by vetoing a tax bill. Notwithstanding this tradition and practice in our republic since its inception, no one denied the bare legal right of the President of the United States to veto any measure passed by Congress. However, I resent deeply the circumstances, the methods, the reasons and the language of this veto message. It does not, as a state paper should, concern itself with the central question; it extends far beyond the necessities of the occasion to make gratuitous slaps at the Congress and contains political platitudes which are not only erroneous and unfounded in fact but are subject only to the construction that they are intended to discredit the Congress and to impair the confidence of the American people in their chosen representatives.

Knowing the President of the United States as I do, I do not view this message as coming from him. It has none of the earmarks of his usual dignified, courteous, and helpful approach to matters of state. I see in this document the hands of a group of individuals not in any sense responsive to the will of the American people, with whom the President is pleased to consult in matters of this kind. This seems clear from a reading of the message itself.

Has the President the time or the opportunity to study and understand the complicated reorganization provisions of the income tax laws to which his message relates, the many involved economic and legal aspects surrounding the technical subjects covered by this bill? You and I know that he does not. Obviously, he is operating solely under the advice of this group to which I refer.

This makes the thwarting of the will of the American people in their carefully guarded grant of the taxing power of the Congress of the United States complete. By this step that power is removed from the Congress and placed in the hands of a group of individuals beyond the reach of the people of this country.

The President in his veto message seeks to place the responsibility for the complication of the tax laws squarely upon the Congress. But under the Constitution, the duty to issue regulations, prepare income tax forms, and administer the tax is an executive power and not a legislative power. If the forms and instructions are complicated and confusing to the taxpayer, the fault lies not with the legislative branch but with the executive.

So far as the tax laws are concerned and the formulation of tax policy, most of the efforts of our committee have been devoted to studying and eliminating unsound and ill-advised schemes of taxation sponsored by the Treasury Department. In his budget message for the fiscal year ending June 30, 1944, the President stated: "Finally, it is more important than ever before to simplify taxation both for taxpayers and for those collecting the tax, and to put our taxes as far as feasible on a pay-as-you-go basis."

With the exception of repeal of the earned income pro vision and the disallowance of any deduction for Federal excise taxes, both of which suggestions are contained in the present bill, the only other proposal suggested by the Treasury was the removal of more than 9,000,000 taxpayers from the tax rolls at a time when there is the strongest possible reason for keeping them on the tax rolls. I would like at this point to mention some of the complicated and outlandish proposals suggested by the Treasury Department in the last few years, which, if adopted, would have in my opinion caused a complete breakdown of our income tax system. I will start only with their recent proposals which were presented to us since November, 1941. On Nov. 5, 1941, The Secretary of the Treasury advocated the following plan to our committee:

"A new supplementary tax on net income might be imposed to be withheld at the source on salaries, wages, dividends, bond interest, and similar items, and to be collected on other incomes quarterly throughout the year. These taxes would thus be collected insofar as possible like the pay-roll taxes. They would, however, have personal exemptions and credits for dependants. The supplementary tax would be deducted from net income in computing the income tax. Because of this deduction and because of the personal exemptions the increase in effective rate of tax would never be as high as the state rate of tax. If the rate of this supplementary tax were 15 per cent and the existing personal income tax exemptions of $750 for single persons and $1,500 for married couples, with a dependent credit of $400 were allowed, it is estimated that at present income levels the net increase in tax revenue would be about . . . $2.8 billion."

This plan, as will be seen, called for a super income tax in addition to the regular income tax, and the super tax thus paid would have been allowed as a deduction in computing the regular income tax. Income, which was not from salaries, wages, dividends, bond interest, and similar items, was to be collected from farmers, businessmen and others, quarterly throughout the year. This would be in addition to regular income tax. If this plan had been adopted, our farmers and businessmen, in addition to paying the regular income tax, would have had to pay a supplementary tax and make quarterly returns. Is this not more complicated than the regular income tax?

Another proposal which would have undoubtedly caused a breakdown of our tax system is the "spending tax." The spending tax was divided into two parts—one a flat rate tax to be refunded after the war and a progressive surtax. The refundable part of the spending tax would be imposed at a flat rate of 10 per cent on the total spendings of individuals for consumer goods and services. The exemptions from spending were $500 for a single person, $1,000 for a married person and $250 for each dependent. The individual spending surtax was levied at graduated rates on spendings. And the exemptions were different from the individual spending tax. In the case of the spending surtax, there was allowed $1,000 for a single person, $2,000 for a married person and $500 for each dependent. These two spending taxes were in addition to the regular income taxes.

When the Treasury appeared before our committee this year, they proposed a post-war refund for the individual income, which would have allowed a greater post-war refund to a single person than to a married person or to a person with dependents. This is shown by the following table:




with two

















We are now busily engaged in preparing legislation simplifying the tax laws and returns as far as possible. This subject can ordinarily be undertaken when we devote ourentire time to it and are not confronted with other problems, such as the raising of additional revenue and legislation relating to renegotiation.

The issue is simple and clear. It is: shall the people of this nation retain, as they zealously sought to do in the Constitution, a complete and direct control over the taxes they are to pay, or shall we permit a group of irresponsible individuals to thwart the will of our people?