Let’s Not Lose Our Faith Too Soon
Reading an editorial urging the elimination of the Alternative Minimum Tax (AMT) recently, I was struck by the ease with which many Americans embrace the idea that the country has become utterly corrupt. The regimen of the AMT-- which requires some to use harsher rules than others when calculating their 'contribution'-- would obviously be unconstitutional if it were imposed as part of a compulsory tax system. Still, it is clear that a majority of the population believe that it is so imposed. A diligently cultivated fear of the IRS has successfully torn the fabric of reason in many minds, allowing these two contradictory concepts-- a compulsory legal duty imposing unequal legal obligations-- to co-exist.
Clearly, one or the other of these two things-- the Constitutional requirement of equal treatment by the law; or that the tax system (of which the AMT is a part) is compulsory-- must be untrue. Just as clearly, the one that must be untrue is that the tax scheme of which the AMT is a part is compulsory. There can be no question about the unconstitutionality of unequal treatment by the law; little, if anything, could be more offensive to our most fundamental principles.
In fact-- despite the apparent willingness of the general public to entertain the contradiction-- what must be so, is indeed so. The U.S. Supreme Court has routinely and definitively declared the income tax to apply solely to the receipts from a very limited list of wholly optional activities. It is only those who choose to engage in those activities-- all connected with, and involving payments by, the federal government-- who are potentially subject to what would otherwise be an illegal tax scheme. The words of the tax laws themselves acknowledge this limited scope.
Nonetheless, this conformity to reality is concealed from casual view. The relevant rulings by the high court were issued long ago. In the meantime, there has been a dedicated campaign conducted by the beneficiaries of ignorance-- such as CPA’s, tax attorneys, IRS agents, and politicians-- to consign those rulings to the memory hole and to discourage open-eyed public consideration of the subject in general. Despite the natural American skepticism toward assertions issuing from such clearly self-interested parties, it has been a successful campaign. The fear factor alluded to above, whereby any contemplation of the income tax is compromised with irrationality and an instinctive urge to move on, is an important contributor to that success.
Another is the fragmenting of the actual taxing statutes into near incoherence in the ‘code’ by which they are now exclusively presented to the public. While those statutes plainly acknowledge the limitations of their scope, they have been cleverly disassembled, scattered, and intermingled in that code-- even to the point of extracting individual sentences from certain sections and placing them thousands of words away into the company of language from other sections. As a consequence, portions of the code-- when carefully excerpted and presented out of context-- appear to claim for the law a scope which it clearly cannot have. These excerpts are waved under the noses of the rare souls who overcome the fear to the point of questioning the beneficiaries of the misunderstanding. They serve to provide some inquirers (who are really looking for no more) with an excuse to claim satisfaction and scamper away with relief. More purposeful doubters are also often dissuaded thereby: Faced with the labyrinth of baffling nonsense which such excerpts reflect, many conclude that to sort through to the truth would be more expensive than simple surrender.
It can be hoped that the errors defended by these cheap tricks-- and the depressing loss of civic self-respect to which they lead-- will not long survive the American predisposition to straight talk and simple truth now that we’ve entered the information age. However, the editorial which stimulated this commentary appeared in one of the nation’s major daily newspapers, and, though critical of the unfairness of the AMT, clearly took for granted that it is compulsory. Thus, even though the road back might be a digital superhighway, it will be climbing a hill.
Still, looking sharply after our own individual interests is a well-established American virtue, as is respect for the rule of law. I think that when all is said and done, the truth will win.
© Peter E. Hendrickson
The absurd argument used to defend the AMT-- and progressivity in general, for that matter-- reveals the illegitimacy of its client concept. In a nutshell, that argument is: Since the same unequal treatment is applied to every target who reaches the same special circumstances, the treatment actually IS equal. This is like declaring that if a law dictates that EVERY 45-year-old redhead named Joe Smith in Cheyenne, Wyoming, is to be taxed at a 99% rate (unlike everyone else, who will simply be subsidized thereby), red-headed 45-year-old Mr. Smith of Cheyenne is thus afforded equal treatment under the law. After all, any other red-headed 45-year-old of the same name who moves to Cheyenne will also be so taxed. Mr. Smith simply loses 'life's lottery', so to speak. At least it will only be one year of outrage for Mr. Smith, because next year he will be 46. Unless the "law" is changed, of course...
The reality of the AMT-- or any other form of progressivity-- is that citizen 'A' is taxed $15 per $100 taken in, while citizen 'B' is charged $20 (to pick numbers solely for purposes of illustration). All the nonsense about the first, as opposed to the second, increment of earnings; margins; rates-on-the-next-dollar-earned, etc.; is nothing but an effort by the beneficiaries of the status quo to obscure this raw reality, and what would otherwise be the obvious fact that the tax thus imposed is not, and cannot be, compulsory. That is, while the tax IS compulsory in regard to the highly specialized activities upon which it is actually imposed by law, those highly specialized activities are entirely optional to any American. Unequal imposition of a tax on optional, voluntary activities is perfectly lawful-- if you don't like it, you don't have to participate in the activities. But such a tax cannot be (and is not) imposed on the routine-- and unavoidable-- exercise of the (untaxable-in-any-case) right to earn money, engage in contracts, etc..
It is by taking advantage of nuances of this sort that beneficiaries of the "income" tax scheme are able to innocently but disingenuously declare that, "Of course the income tax is compulsory!", while still concealing the truth by failing to explain the custom legal definition of the term "income" within federal revenue law. An example will serve to illustrate: If Congress were to pass legislation which included sections specifying that, "For purposes of this act, "breathing" means selling hot-dogs from the steps of the capital building", and, "There is hereby imposed a $10 annual tax on breathing", it could then be said with a straight face that there is a compulsory tax on breathing, but it still wouldn't mean that every American is thus involuntarily obliged to pony up $10 every year for the taking in of air. The construction and the presentation of the "income" tax is of precisely this character. The square peg actually has a square hole to match, and the law as written is not in irreconcilable conflict with the Constitution. But don't rely on the beneficiaries of misunderstanding to make this clear.