Here's the story:

The Founding Fathers had rejected income taxes (or any
other direct taxes) unless they were apportioned to each
state according to population. Nevertheless, an income
tax was levied during the Civil War and upheld by the
Supreme Court on somewhat tenuous reasoning. When
another income tax was enacted in 1893, the Supreme
Court found it unconstitutional. In connection with the
two Pollock cases reviewed in 1895, the Court declared
that the act violated Article I, section 9 of the
Constitution.

During the following decade, however, the complexion of
the Court changed somewhat, and so did public
sentiment. There was great social unrest and the idea of
a tax to "soak the rich" began to take root among liberals
in both major parties. Several times the Democrats
introduced bills to provide a tax on higher incomes but
each time the conservative branch of the Republican
party killed it in the Senate. The Democrats used this as
evidence that the Republicans were the "party of the
rich" and should be thrown out of power, forcing
President William Howard Taft to acknowledge in political
speeches that income taxes might be all right "in
principle", but it was well known among close associates
that he was strongly opposed to such a tax.

The Bailey Bill

In April 1909, Senator Joseph W. Bailey, a conservative
Democrat from Texas who was also opposed to income
taxes, decided to further embarrass the Republicans by
forcing them to openly oppose an income tax bill similar
to those which had been introduced in the past. He
introduced his bill expecting it to get the usual
opposition. However, to his amazement, Teddy
Roosevelt and a growing element of liberals in the
Republican party came out in favor of the bill and it
looked as though it was going to pass.
Not only was Bailey surprised, but Senator Nelson W.
Aldrich of Rhode Island, the Republican floor leader,
frantically met with Senator Henry Cabot Lodge of
Massachussetts and President Taft to work out a
strategy to demolish the Bailey tax bill. Their own party
was split too widely to permit a direct confrontation, so
the strategy was to pull a political end run. They
announced that they favored an income tax but only if it
were an amendment to the Constitution. Within their
own circle, they discussed how it might get approval of
the House and the Senate, but they were quite certain
that it could be defeated in the more conservative
states-three-fourths of which were required in order to
ratify the amendment.

Thus, the Democrats were off guard when President Taft
unexpectedly sent a message to Congress on June 16th,
1909, recommending the passage of a consitutional
amendment to legalize federal income tax legislation.
The strategy threw the liberals into an uproar. At the
very moment when their Bailey bill was about to pass,
the Republicans were coming out for an amendment to
the Constitution which would probably be defeated by
the states.

Reaction to the Amendment

Congressman Cordell Hull (D-Tenn., and later Secretary
of State under FDR) saw exactly what was happening.
He took the floor to excoriate the Republican leaders.
Said he:
"No person at all familiar with the present
trend of national legislation will seriously
insist that these same Republican leaders are
over-anxious to see the country adopt an
income tax...What powerful influence, what
new light and deepseated motive suddenly
moves these political veterans to 'about
face' and pretend to warmly embrace this
doctrine which they have heretofore
uniformly denounced?" {1}
He went on to expose what he considered to be a
political trick. He needn't have been so concerned. The
slogan of "soak the rich" automatically aroused Pavlovian
salivation among politicians both in Washington and the
states. The Senate approved the Sixteenth Amendment
with an astonishing unanimity of 77-0! The House
approved it by a vote of 318-14.

When Republican Congressman Sereno E. Payne of New
York, who had introduced the amendment in the House,
saw that this end run was turning into a winning
touchdown for the opposition, he was horrified. He went
to the floor and openly denounced the bill he had
sponsored. Said he:
"As to the general policy of an income tax, I am utterly
opposed to it. I believe with Gladstone that it tends to
make a nation of liars. I believe it is the most easily
concealed of any tax that can be laid, the most difficult
of enforcement, and the hardest to collect; that it is, in a
word, a tax upon the income of honest men and an
exemption, to a greater or lesser extent, of the income of
rascals; and so I am opposed to any income tax in time
of peace...I hope that if the Constitution is amended in
this way the time will not come when the American
people will ever want to enact an income tax except in
time of war." {2}

The end run of the Republican leadership did indeed
backfire. State after state ratified this "soak the rich"
amendment until it went into full force and effect on
February 12, 1913 (Ed.note: Mr. Bill Benson, in his
book "The Law That Never Was" has since documented
massive...and outcome changing...federal interference in
the certification of the votes of the individual state
legislatures. The votes for and against from Kentucky,
for instance, were switched by then Secretary of State
Philander Knox.)

Did it Soak the Rich?

Certain writers such as Alfred Hinsey Kelly and Winfred
Audif Harbison (authors of "The American Constitution:
Origins" [New York: Norton, 1970]) rejoiced that this
amendment "shifted the growing burden of federal
finance to the wealthy."{3} Nothing could be further
from the truth!

The wealthy, especially the super-wealthy, had
anticipated this development and had created a clever
device to protect their riches. It was called a "charitable
foundation". The idea was to cosign the ownership of
wealth, including stocks and securities, to a foundation
and then get Congress and the state legislatures to
declare all such charitable institutions exempt from taxes.
By setting up boards which were under the control of
these wealthy benefactors they could escape the tax and
still maintain control over the disposition of these
fabulous fortunes.

Long before the federal income tax was in place,
multimillionaires such as John D. Rockefeller (who once
said "I want to own nothing and control everything"),
J.P. Morgan and Andrew Carnegie had their foundations
set up and operating. The next step was to make certain
that the new tax bill passed by Congress contained a
provision specifically exempting their treasure houses
from taxation.

The tax bill which the Sixteenth Amendment authorized
was introduced as House Resolution 3321 on October 3,
1913. It turned out to be somewhat of a legislative
potpourri for tax attorneys, accountants and the federal
courts. In the ensuing years, untold millions of dollars
have been spent trying to figure out exactly what this
tax law, and those which followed it, were intended to
provide. However, tucked away in its inward parts was
that precious key which safely locked up the riches of
the super wealthy. Here are the magic words under
Section 2, paragraph G:
"Provided, however, that nothing in this
section shall apply...to any corporation or
association organized and operated
exclusively for religious, charitable, scientific
or educational purposes."

All of the foundations of the super-rich were designed to
qualify under one or more of these categories.
 

How the Cute Little Monkey Grew into a Gorilla

When the first income tax was sent out to the people, the
Congress chortled confidently that "all good citizen will
willingly and cheerfully support and sustain this, the fairest
and cheapest of all taxes." That was the cute little monkey
part. After all, the first tax ranged from merely 1% on the
first $20,000 of taxable income and was only 7% on
incomes above $500,000. Who could complain?(Ed. note:
In 1994 "dollars" that $20K is now over $250K and the
$500K is today over $6 million!)

At first, scarcely anyone did. Little did they know that
before the tinkering was done in Washington, this system
would be described by many Americans as the most unfair
and expensive tax in the history of the nation. Within a
few years, it had become the principal source of income
for the federal government.

In the beginning, hardly anyone had to file a tax return
because the tax did not apply to the vast majority of
America's work-a-day citizens. For example, in 1939, 26
years after the Sixteenth Amendment was adopted, only
5% of the population, counting both taxpayers and their
dependents, was required to file returns. Today, more
than 80% of the population is under the income tax.
 

Withholding Taxes

The collection process was greatly facilitated in 1943 by a
device created by FDR to pay the costs of WWII. It was
called "withholding from wages and salaries". In other
words, the tax was collected at the payroll window before
it was even due to be paid by the taxpayer. Economists
point out that this device, more than any other single
factor, shifted the tax from its original design as a tax on
the wealthy to a tax on the masses--mostly the middle
class. Investigations disclosed that the truly wealthy pay
relatively little or no income tax at all.

Some idea of how the cute little monkey grew into a gorilla
is perceived from the fact that nearly half of all federal
revenue is now raised by income taxes. Furthermore, the
higher brackets are literally confiscatory--but by "due
process", of course, under the Sixteenth Amendment.
Rates have been as high as 94% in the upper brackets
during wartime, and even in peacetime they are presently
50%. (Ed.note: This piece was apparently written when
the top rates were higher than in 1992. Not to worry,
however: Watch for higher rates coming soon to an IRS
office near you!) Medium income people up through the
upper middle class pay between 12 & 35%. Nevertheless,
at all levels it has become sufficiently burdensome to
discourage the attainment of basic economic advantage
which most Americans seek.
 

Weaknesses of the System

The most damaging aspect of the Sixteenth Amendment is
the fact that it vitiated the unalienable rights provided in
the 4th Amendment. This is the amendment which
protects privacy--privacy of the home, business, personal
papers and personal affairs of the private citizen. None of
these are disturbed by a poll (head or capitation) tax
because it is so much per person regardless of the
circumstances, but when the tax is based on income, the
IRS is assigned the most unpleasant task of making certain
that everyone pays his fair share. This task is physically
impossible without prying into the private papers, private
business and personal affairs of the individual citizens. By
any standard, it is a miserable assignment. Furthermore, it
is impossible to run audits and surveys of all taxpayers
and so the audits seldom check more than 2% of them.
There are many things wrong with this approach. Worst
of all, it puts the government tax collectors in the gorilla
role and intimidates citizens who are unlucky enough to be
audited with the feeling that they are "victims" of an unfair
system.

The IRS also finds it difficult to avoid the attitude that
each taxpayer is a cheat, even a criminal, who must
somehow be cornered and caught. This has brought the
structure of the entire income tax collection process into
question.

For example, the underground economy of monetary
transactions (which is conducted without records) is well
known. It is estimated that losses in federal revenues from
this underground econony are at least $100 billion per
year. (Ed. note: Probably closer to $200-300 billion!)

Obviously, this is not fair to those who are paying their
share. Then there is an estimated $65 billion per year
which is lost because it is not reported. This is considered
unfair. There is a lot of padding on expense accounts,
which is estimated to reduce the tax totalby another $18
billion. Other operations, both legal and illegal, jumps the
total up a few billion more.

There has also been extensive criticism of the prosecution
of tax cases. The appeal is through a system of tax courts
which are without juries. In order to get a tax case into a
regular court where there is a jury, the citizen must pay
the tax and then sue the government.

Thousands of complaints have also poured into the IRS
concerning the tactics used by some of its agents. Citizens
feel they are treated as criminals rather than suspects who
are innocent until proven guilty.

Is there a better way? Here is one answer by a former
head of the IRS.
 

A Former IRS Commissioner's Statement

T. Coleman Andrews served as commissioner of IRS for
nearly 3 years during the early 1950s. Following his
resignation, he made the following statement:
"Congress [in implementing the Sixteenth Amendment]
went beyond merely enacting an income tax law and
repealed Article IV of the Bill of Rights, by empowering the
tax collector to do the very things from which that article
says we were to be secure. It opened up our homes, our
papers and our effects to the prying eyes of government
agents and set the stage for searches of our books and
vaults and for inquiries into our private affairs whenever
the tax men might decide, even though there might not be
any justification beyond mere cynical suspicion.

"The income tax is bad because it has robbed you and me
of the guarantee of privacy and the respect for our
property that were given to us in Article IV of the Bill of
Rights. This invasion is absolute and complete as far as
the amount of tax that can be assessed is concerned.

Please remember that under the Sixteenth Amendment,
Congress can take 100% of our income anytime it wants
to. As a matter of fact, right now it is imposing a tax as
high as 91%. This is downright confiscation and cannot
be defended on any other grounds.

"The income tax is bad because it was conceived in class
hatred, is an instrument of vengeance and plays right into
the hands of the communists. It employs the vicious
communist principle of taking from each according to his
accumulation of the fruits of his labor and giving to others
according to their needs, regardless of whether those
needs are the result of indolence or lack of pride,
self-respect, personal dignity or other attributes of men.

"The income tax is fulfilling the Marxist prophecy that the
surest way to destroy a capitalist society is by - _steeply
graduated_ taxes on income and heavy levies upon the
estates of people when they die.

As matters now stand, if our children make the most of
their capabilities and training, they will have to give most
of it to the tax collector and so become slaves of the
government. People cannot pull themselves up by the
bootstraps anymore because the tax collector gets the
boots and the straps as well.

"The income tax is bad because it is oppressive to all and
discriminates particularly against those people who prove
themselves most adept at keeping the wheels of business
turning and creating maximum employment and a high
standard of living for their fellow men.

"I believe that a better way to raise revenue not only can
be found but must be found because I am convinced that
the present system is leading us right back to the very
tyranny from which those, who established this land of
freedom, risked their lives, their fortunes and their sacred
honor to forever free themselves..."{4}

REFERENCES
1.Congressional Record-House, July 12,1909,p.4404
2.Congressional Record-House, July 12,1909,p.4390
3.Original edition, p.626
4.The Utah Independent, March 29, 1973