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The Federal Income Tax in the USA is an Un-Ratified Sixteenth Amendment. 

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The history of federal income tax in the USA continues to draw varied views from diverse groups. 

Its perception has varied greatly sine 1913. Tax protestors claim that the Sixteenth Amendment was not ratified properly. 

Today, the Sixteenth Amendment has led to increase in tax remittances in some areas and decrease in others. 

As far as this law is concerned, payment for goods and services made over the internet is taken as fraud. 

According to the Grace Commission Report given to US former president Ronald Reagan, several recommendations were made which involved correction mechanisms meant to prevent abuse and wastes in the federal tax system and create huge savings. 

It was suggested in the report that $24 billion would be saved within a period of 3 years and this figure would reach $1.9 trillion by the year 2000. 

These proposals were meant to turn around USA’s federal debt in a very significant way.

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Income Tax Used to Reduce State Powers

From the viewpoint of the libertarian, it is better if there is respect for natural rights which guarantee enjoyment the fruits of one’s labor. 

From here we see the government is always being accused of using the federal tax income in the USA to reduce the powers of individual states. 

These rights, the libertarians say, had been provided for by the Ninth amendment which they prefer to the current amendments. 

According to them, income taxation is an infringement on that right, and this has been explained in the proposed bill which if passed would address these and many other issues. 

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The Power of Government 

The federal government has the powers to distribute the money collected to individual states with conditions attached. 

This leaves these states with no alternative but comply with all the demands of the federal tax authorities, making the procedure of collecting federal income tax in the USA appear like fraud. 

Those who propose introduction of consumption tax say that income tax encourages people to spend rather than save. 

This is because of the incentives it makes provisions for. 

A taxpayer is taxed only if the income is spent immediately and again interest accruing from such an income is taxed.

This can be remedied by excluding taxation on investment incomes and providing for deductions on investments. 

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A New Amendment? 

There is a bill pending in the US congress which if passed would be an amendment to the Sixth Amendment. 

This would ensure that income is taxed only after some gains have been experienced. 

Forty per cent of income earners do not pay federal income tax in the USA, yet this is the greatest source of revenue for the government. 

The highest paid income earners form 1% of the entire income bracket and they pay 25% of all the income tax. 

The Sixteenth Amendment as drafted in 1913 gives unclear directions on collection of federal income tax in the USA and then apportioning it to individual states without bowing to census or any form of enumeration.

It does not address the issue of having never ratified the sixteenth amendment in the first place.

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