10. Union Forever

CHAPTER X

Union Forever

THE CIVIL WAR did not abolish the autonomy of the states. All that was settled by that conflict was the questions of secession and nullification; no state could pull out of the Union or disregard a regularly enacted national law. After 1865, as before, the states were still the depositories of all powers not specifically delegated to the federal government, as stipulated in the Constitution.

After 1913, however, and without either a war or a change in the law of the land, the states were gradually and almost imperceptibly rid of their sovereign position and reduced in importance to dependent subdivisions of the nation. It was done by the subtle arts of bribery and blackmail, made possible by the Sixteenth Amendment.

From the very beginning of the Union it has been customary for Congressmen to try to wangle out of the federal government some special privilege for their more influential supporters, or some appropriation of federal funds for spending in their states. “Pork barrel” legislation did not begin with the Sixteenth Amendment. However, before 1913 the best the party in power could do for a Congressman (or a state governor), by way of a bribe, was to let him hand out a judgeship or a postmastership, an occasional franchise or perhaps a land grant.¹ Such favors helped the state machines to see eye to eye with the federal government and win their support for its programs; but the total of such patronage was not enough to reduce the states to subserviency. The manna that fell from Washington was hardly enough to buy up the independence of the states or the votes of their citizens. No candidate for Congress could offer his constituents gifts paid for by the citizens of other states.

The ink was hardly dry on the Sixteenth Amendment before the heretofore picayune federal patronage began to blossom into the program of grants-in-aid. The first of these came in 1914, when the Agricultural Extension Service was inaugurated with an appropriation of $480,000—not so inconsiderable an amount in those days. Each year thereafter Congress found reason to pass “general welfare” legislation, with appropriations increasing in importance. Whether the “general welfare” prospered by these expenditures is questionable, but it is certain that the political fortunes of the politicians who could boast of “bringing home the bacon” did not suffer.

The laws multiplied and the appropriations grew bigger. It is a curious fact that as the government’s revenues increase so do its needs.

Before 1913, the country was in difficulty several times, but it never suffered from an “emergency”; that national disease is a product of the income tax, and as the levies increased, the affliction recurred with greater frequency and greater intensity.

War, or the threat of it, is a most important “emergency,” and since 1913 we have had two major wars, a “punitive expedition” and at least one “police action.” We finally got around to permanent peacetime conscription, thanks to an “emergency,” with its costs. In between all this a depression came upon us, even as did “hard times” several times before the Sixteenth Amendment. The country managed to get out of these former economic disasters without federal intervention; but the depression of 1929 was not allowed to cure itself; it had to be ministered to with taxes.

Every post-Sixteenth Amendment “emergency” became an occasion for raising the rates of taxes on incomes and of lowering the exemptions; that is, for taking more of the incomes of more persons. The odd thing about these “emergency” taxes is that they hang on after the original occasion for them disappears. Just by way of illustration, first-class postage before World War II was two cents an ounce; the rate was raised to three cents “for the duration.” Later legislation made the increase permanent. Perhaps other factors, like inflation, made continuation of the increased rate necessary, although that is a debatable question; the point is that the promise of the original legislation was never kept. In like manner, a great “need” ushered in every increase in income taxes, with the tacit or explicit understanding that the levies would be dropped when the “need” no longer existed; but every “need” hardened into a permanent necessity.

Popular suffrage fosters government by and for pressure groups. The first concern of a politician is to be elected, the second is to be reelected. No matter how noble he is at heart, no matter how sincere his desire to serve his country, practical considerations force him to cater to individuals or groups who can “deliver the vote”; he cannot do anything for the good of his country unless he is in office. Hence, he is inclined to make promises to do this or that for the benefit of those who can help him at the polls. Since an office holder has nothing to offer but laws, his preelection promises amount to the pledging of the political power with which he is invested. But the patriotic citizens who enter into the bargain are not interested in political power in itself; what they are after is an economic advantage that political power can confer upon them. They are interested in sinecures on the public payroll, franchises, public works and contracts that bring jobs to the community and profits for the contractors, handouts, and so on.

This practice of buying votes with political favors is inherent in popular government. It is the weakness of democracy. It is not due so much to the depravity of the politician as to the human hunger for something-for-nothing.

However, this weakness of democracy is only as dangerous as the amount of the citizens’ wealth the government has at its disposal. Before 1913 the American government was comparatively poor and political jobbery was correspondingly limited in scope. When the government acquired this power of confiscating the national wealth, the corruption was limited only by the amount that expediency would permit it to confiscate. At this writing the confiscation amounts to one third of the production of the citizenry. That is a lot of “pork” with which to buy votes. And so, as the Sixteenth Amendment gradually achieved its fulfillment, the politician’s attention was more and more directed toward the “barrel”; so was the attention of those who are compelled to keep it filled.

The dependence of the state political machinery on the coffers of the federal government carries an obligation: to support and acquiesce in the policies and purposes of the ruling regime. If a governor asks for or accepts a school subvention, he cannot very well object to the curriculum or textbooks “recommended” by the Bureau of Education. And a Congressman who tries to become a liaison officer between his voters and the United States Treasury will probably vote for any program the regime wants. Even a city mayor might find it politically inexpedient to reject a housing subsidy offered by the federal government. The funds at the disposal of Washington make it possible for the bureaucracy to go over the heads of noncooperative local politicians to the people, to propagandize them in favor of what it wants and against the independent local politician; it is a known fact that the Washington bureaucracy maintains a most extensive propaganda machine.

Thus, every federal dollar spent in a state becomes an obligation on the state. The obligation is paid off with sovereignty; the state sells out its independence. It is all done without change of the law, without any modification of the Constitution, and is as imperceptible as the gradual wearing down of a proud horse by a resolute trainer.

Once in a while, however, the fact of what is going on is dramatically disclosed when a state government asserts its independence. Thus, when the Indiana legislature, during the Truman administration, decided to make public its relief rolls, in order to put a stop to corruption in the distribution of public money, the federal government showed its fangs; it threatened to withdraw its fifty percent contribution to these relief funds if Indiana persisted in its purpose. This blatant attack on the sovereignty of a member of the Union received wide publicity. It will probably never be known how much quiet pressure is put on state governments (through favors extended to local politicians) to submit to federal domination.

This centralization of power, which the Founding Fathers feared and sought to prevent by constitutional safeguards, is made possible only by income taxation. This is the atomic bomb that has virtually destroyed the Union. But, it may be pointed out, the state legislatures ratified the Sixteenth Amendment in the first place; did they not know that they were voting themselves out of business? Probably not. Most of the states were poor and envious of those in better circumstances, and all they saw in the Sixteenth Amendment was a way to “soak the rich.”

For some years after the Amendment went into effect, seven states of the Union paid in more to the federal government in income taxes than they got back in the form of grants-in-aid; the other forty-one made a “profit.” Covetousness was thus encouraged. Somehow, a Mississippian sees no immorality in forcing a Pennsylvanian to support his local economy. His pride might stop him from accepting a gratuity from his neighbor, but he suffers no such inhibition when he knows it comes from a “foreigner.” So, it came to pass that a Congressional coalition, representing the poorer states, and held together only by their common greed, pressed for legislation that would bring them dollars mulcted mainly from the citizens of the seven rich states. That is the bald fact, though the legislation was glamorized with the “public interest” label. According to the label, New York profits by its forced contribution to Arizona irrigation projects or Montana roads. However that might be, the immediate beneficiary of federal grants to local projects is the politician who solicits it, and the ultimate beneficiary is the federal bureaucracy. Everybody else pays.

Today, every state in the Union pays into the income-tax fund more than it gets back. (See table at the end of this chapter.) This outcome was inevitable. The Sixteenth Amendment gives the federal government power to levy on incomes “from any source derived.” This includes the incomes of citizens in the poorer states, and the federal government had to get around to them in time.

But the fact that every state is now a loser gives them all a common interest in the repeal of the Amendment. They all have an economic motive for raising the banner of States’ Rights, for reestablishing their sovereignty; they would all profit by repeal of income taxation. How could they lose?

Twice in the history of the country the doctrine of home rule was called from retirement to lead a secessionist movement, and each time the motivation was economic. In 1814, when the British fleet had all but ruined New England industry and commerce, delegates from these states met to consider ways and means, not excluding secession from the Union. What might have come from the Hartford Convention must remain conjecture, for “Mr. Madison’s War” was called off before the proposed second gathering was convened. The renewal of business activity put the doctrine back into the textbooks.

States’ Rights became the battle cry of the South only because the planters felt the pinch of protective tariffs. No one would ever have heard of nullification and secession, and certainly not of war, if Calhoun’s plea for lower tariffs had been heeded—or if the government had been able to buy off the planters with “parity” prices, which it could not do for lack of an income tax. After the war had destroyed the economic interest which had inspired it, States’ Rights was again interred.

The fires of freedom are stoked by the will to be free. It is not the promise of bread alone that will spur a people to shed their shackles, but rather the hope that they may attain the dignity of self-respecting individuals. Without idealism a revolution is nothing but a gang fight. Nevertheless, it will be found that every struggle for freedom was led by a group who, though prompted by lofty purposes, had some immediate economic objective in mind; it may not have been personal gain that drove them to act, it may have been the improvement of general conditions, but in any case an economic motivation was present. Nor will the rank-and-file go through the struggle of liberation unless they can see a pot of gold in the rainbow.

At the present time there is no economic group sufficiently disturbed about income taxation to start doing something about it. On the other hand, a sizable number of Americans, and particularly those who have the resourcefulness to take care of themselves under any conditions, have managed to attach themselves to the income-tax wagon and see no reason for breaking it up.² They are doing pretty well for themselves, so well, in fact, that they are blinded to the ultimate effects of income taxation on the welfare of their offspring, on the future of their country. To them the income tax has been good.

For instance, the banking fraternity is not overly disturbed by high income taxation; because of these revenues, the government can guarantee the mortgages the banks hold on overvalued veterans’ homes and other housing projects; these guarantees might not be worth much if the Sixteenth Amendment were repealed.³ The industrialists who revel in a backlog of government orders likewise see no reason for repeal. Nor can the farmers work up any interest in the matter since it is out of income-tax revenues that they get “parity” support as well as checks for not producing. College professors whose salaries depend on government subsidies, veterans whose incomes are augmented by gratuities from the federal treasury, dentists who pull teeth at government expense, tenants whose rent is more or less paid by the government, two and a half million who are on the public payroll—probably half the population of America are wholly or in part dependent on income taxes for their livelihood, have made a comfortable adjustment with it, and though they grumble about the part they have to pay, would not like to have their adjustment disturbed.

Among these beneficiaries of the income tax are the type of people who could be the backbone of a revolt. In time, they will be, for it cannot be long before their benefits will be more than offset by the taxes they have to pay; the “take” of the government, increasing as a percentage, must ultimately wipe out the winnings of all the players. When that time comes, or when they become aware of it, those who are now for income taxation will discover that they have been robbed not only of their property but also of their freedom, and will kick up a fuss. Meanwhile, they are content to keep their snouts in the public trough.

That part of the population who get no return on their income-tax payments—obviously, the government cannot subsidize everybody—are too preoccupied with the problem of making ends meet to do anything but grumble. Were a leadership to appear, explaining that repeal of the Sixteenth Amendment would do away with withholding taxes, that the waitress would not have to share her tips with the tax collector, that the grocer would no longer have to hire an accountant to keep him out of jail, that the housewife would not have to conspire with her housemaid to evade the law, a goodly crowd would join up.

The only group that could logically furnish that leadership are the governors and legislators of the states. Repeal of federal income taxes would not only reestablish their importance and dignity, but would also put them in the way of increasing the revenues of the states for the carrying on of such social services as the citizens call for. The states would set themselves up in business again. And some degree of statesmanship could attach to the job of the representative in Washington if he were relieved of the necessity of panhandling.

Besides, any change in the Constitution is still the prerogative of the states. If three quarters of the members of the Union demand an amendment (and repeal would be an amendment), Congress must put it into the works; the signature of the President is not needed. Hence, the initiation must come from the states.

Repeal of the Sixteenth Amendment would amount to secession of the forty-eight states from Washington—and restoration of the Union.

FEDERAL INTERNAL REVENUE COLLECTIONS OF THE UNITED STATES REPORTED FOR THE FISCAL YEAR 1951, COMPARED WITH REPORTED GRANTS-IN-AID TO STATE AND LOCAL GOVERNMENTS, AND FEDERAL AID PAYMENTS TO INDIVIDUALS WITHIN THE RESPECTIVE STATES, OTHER THAN GRANTS AND LOANS, WITH PERCENT OF COLLECTIONS RETURNED TO EACH STATE IN FISCAL 1951.

TOTAL INTERNAL REVENUE COLLECTIONS, fiscal 1951¹

$51,487,378,963

Returned to State and local governments and as direct payments to individuals

4,850,097,620

AVERAGE PERCENT of total collections returned: 9.42%

State	Internal Revenue Collections	Returned to States or Individuals	Percent Returned
Alabama	$ 298,452,466	$126,667,671	42.44
Arizona	106,437,924	32,399,593	30.44
Arkansas	130,984,457	95,575,552	72.96
California	3,558,227,339	346,489,944	9.73
Colorado	353,849,385	77,001,460	21.76
Connecticut	818,038,816	38,958,392	4.76
Delaware	566,957,101	8,349,423	1.47
Florida	467,624,260	107,994,759	23.09
Georgia	497,447,795	141,615,626	28.47
Idaho	91,354,432	32,105,915	35.14
Illinois	4,328,996,624	201,710,885	4.65
Indiana	1,202,616,546	85,093,494	7.08
Iowa	438,239,605	81,521,885	18,58
Kansas	385,361,679	58,214,755	15.10
Kentucky	1,056,514,846	90,585,619	8.57
Louisiana	410,122,482	179,171,766	43.69
Maine	127,370,116	24,580,171	19.29
Maryland2	1,417,285,966	140,175,242	9.90
Massachusetts	1,486,571,308	146,442,645	9.80
Michigan	4,156,021,742	144,470,510	3.47
Minnesota	786,759,261	90,239,781	11.47
Mississippi	113,976,845	106,590,440	93.58
Missouri	1,392,271,994	160,044,711	11.50
Montana	91,691,015	34,613,013	35.23
Nebraska	334,020,815	51,135,039	15.31
Nevada	47,505,504	9,670,564	20.36
New Hampshire	87,177,119	14,610,301	16.76
New Jersey	1,460,314,212	85,523,048	5.86
New Mexico	80,607,390	35,819,902	44.44
New York	9,243,924,053	345,822,642	3.74
North Carolina	1,257,159,936	130,988,567	10.42
North Dakota	57,680,073	30,665,635	53.15
Ohio	3,292,928,469	169,122,171	5.13
Oklahoma	494,893,021	117,124,017	23.66
Oregon	361,510,696	53,994,428	14.93
Pennsylvania	3,886,470,430	286,116,616	7.36
Rhode Island	239,708,304	21,864,280	9.12
South Carolina	191,326,842	82,551,046	43.14
South Dakota	64,281,915	29,725,521	46.24
Tennessee	398,608,019	140,675,680	35.29
Texas	1,683,259,143	290,169,323	17.24
Utah	109,532,371	34,361,074	31.29
Vermont	48,675,291	11,523,124	23.67
Virginia	863,146,269	65,361,252	7.57
Washington3	602,633,864	86,121,485	14.29
West Virginia	245,969,387	46,271,356	18.81
Wisconsin	963,172,326	81,965,115	8.51
Wyoming	48,984,119	23,517,644	48.01
Hawaii	98,022,630	22,478,673	22.93

---

¹ In 1932 the programs in effect totaled $269,425,252. During the wartime fiscal year 1946, the grants-in-aid and checks to individuals totaled $1,290,107,183. As these figures were compiled, there were 80 programs and activities under which federal revenues were shared with or funneled back to the states and local governments, or as direct payments to individuals. (Payments to individuals were exclusive of payments to civilian employees of the federal government who at this time numbered more than 2,530,000, with payrolls at an annual rate of over $10 billion a year.)

² Maryland receipts include revenues from the District of Columbia and Puerto Rico. For fiscal 1951 the District received a total of $34,384,443 in federal aid and Puerto Rico received $54,412,416. The actual Maryland figure is $51,378,383.

³ Figures on collections for Washington include Alaska. Amounts have not been shown separately by the Treasurers annual report. Federal aid reported for Alaska for fiscal 1951 totaled $5,789,295.

Author’s note: The preliminary summary of this table states that the average percentage of total collections returned to the states and individuals is 9.42. This is an incorrect and misleading figure, and is a perfect example of how easily statistics may be used to state an untruth. It is indeed true that, of the lump sum collected by the federal government from all the states, a lump-sum percentage of 9.42 was returned to the states. But it is not true that the average percentage returned to each state and individual was 9.42. Actually, the average percentage returned to each state was 22.64. This correct percentage is arrived at by averaging the 49 percentages listed in the table.

You can’t take 566,957,101 (Delaware), lump it together with 113,976,845 (Mississippi), divide the lump sum into the lump sum of the amounts returned to these two states, then draw an average of the percentages returned to the states. You can’t do this because the separate sums are of different amounts, and percentages drawn from two different amounts cannot be averaged. For your average percentages returned to these states, you have to take the two percentages given—1.47 and 93.58—and average them.

---

¹ During recent years, the federal government has regained by purchase or state grant a good portion of the land it so lavishly distributed for political purposes during the nineteenth century. It now owns about one fourth of the land of the country. Since this is federal land, the states cannot collect any taxes from its users. This is practically “foreign soil” as far as the states are concerned, outside their jurisdiction and yielding them no land tax.

² A striking instance of how the federal government has built up a vested interest in income taxes is the case of the Reconstruction Finance Corporation. This agency, set up in the Hoover Administration on a “temporary” basis, makes loans to companies who can prove that private financial institutions have rejected their applications; that is, to companies that are not entitled, on the basis of their financial statements or their performance, to loans. Some 14,000 of such presumably unsafe companies, in 1950, had obtained funds from the RFC; the citizens of the United States were compelled to loan money to people whom the banks had turned down. Obviously, the borrowers were grateful. The Sixteenth Amendment was very good to them. Since this was written, Congress has terminated the life of the RFC, and has replaced it with the Small Business Loan Corporation.

³ The condition of the banks is worth commenting upon, because of the importance of these institutions to the general economy. The banks, as a whole, now hold government bonds in an amount equal to upwards of sixty percent of their total assets. A sizable drop in the value of these bonds could wipe out their net worth and bring on an insolvent position. Repeal of income taxation would certainly affect the value of these bonds adversely. The banks must be against it. Furthermore, they are in the peculiar position of not being able to refuse to take more bonds, because such refusal would be tantamount to repudiating the soundness of their main borrower and thus casting reflection on their own soundness. Thus, the banks have slipped into the position of dependence on and subservience to the United States Treasury; to all intents and purposes they constitute the bank of the government.