AMERICA-CENTRAL BANKING SCAM ACT OF 1871

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The Articles of Confederation, which secured the unity of the several independent States, tied the hands of the Federal Government by making them dependent upon the State Governments for revenue. This dependency almost destroyed the Union before it really got started. The Constitution, however, provided for a compromise between the independent State's rights to tax the people, and the Federal Government's right to concurrent taxation of the same people, so that both could support themselves without interfering with, or diminishing, the tax revenues of the other. This compromise was accomplished by a restriction placed upon the Federal Government as to the prescribed method used in obtaining tax revenues from the same people. The State Governments were to obtain their primary revenue directly from the people, i.e., through taxes levied upon real and personal property, poll taxes, and sales taxes. Whereas, the Federal Government was to obtain their primary revenue "indirectly" from the people through "Impost, Excise and Duty" taxes levied upon the importation, manufacture and consumption of commodities, as well as, tobacco products and liquor. When necessary, however, the Federal Government could levy Taxes "directly" upon the people, but such taxes were to be "apportioned" to the States by population.

As early as 1798 it became necessary for the Federal Government to levy an apportioned direct tax upon "dwelling houses, lands and slaves". This action occurred again during the Spanish American War in 1813 and 1815. The first Federal Income Tax, however, was levied during the Civil War (1861-1870) as a means of collecting additional tax revenue from sources not normally called upon to contribute to the Federal coffers. Whereas the Acts of 1798, 1813, 1815, and the Civil War Acts of 1861-70 levied an apportioned direct tax, based upon the assessed value of real estate, the Acts of 1861 to 1870 levied an additional un-apportioned tax based upon the "income" derived from real estate and invested personal property. In addition to these taxes on "income", the 1894 Act also levied an excise tax upon business transactions, i.e., "business, privileges, or employments (not 'employees')", measured by the respective "gain or profit" (income) derived therefrom.

The Income Tax Act of 1894 was different from those Acts levied during the Civil War period in that it did not provide for the apportioned direct tax based upon property value, and, more importantly, was levied in a time of profound peace. This Act, therefore, was challenged as falling within the "direct" class of taxation requiring apportionment. The reasoning, expressed by the court for addressing the issue of Constitutionality, in the case of the 1894 Act is found on page 573-574 of 157 U.S. 427 [Pollock v. Farmers' Loan and Trust]. There the Court explained:

1. That the distinction between direct and indirect taxation was well understood by the framers of the Constitution and those who adopted it.
2. That under the State system of taxation all taxes on real estate or personal property, or the rents or income thereof was regarded as direct taxes.
3. That the rules of apportionment and of uniformity were adopted in view of that distinction and those systems.
4. That whether the tax on carriages was direct or indirect was disputed, but the tax was sustained as a tax on the use and an excise.
5. That the original expectation was that the power of direct taxation would be exercised only in extraordinary exigencies, and down to August 15, 1894, this expectation has been realized. The Act of that date was passed in a time of profound peace, and if we assume that no special exigency called for unusual legislation, and that resort to this mode of taxation is to become an ordinary and usual means of supply, that fact furnishes as additional reason for circumspection and care in disposing of the case.

In other words, the Court recognized the Act of 1894 as being a change in Federal tax policy, and therefore reviewed it on the basis of that change in policy, not on the basis of the tax itself. This is evident by the dissenting opinions of Justices White, Harlan, Jackson, and Brown. In any event, the majority (5) of the court held the tax in question to be a "direct" tax requiring apportionment and thereby unconstitutional and void. In the first court case (157 U.S. 427 @ 583) the court provides this reasoning for their decision:

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