Blackstone and Dowell: The Income Excise Revealed

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    With the adoption of the English Common Law as the foundation for our American legal institutions, it was understood, by those men who wrote and subscribed to those documents that were created to adapt that august body of law to America’s particular circumstances and needs, that the terms contained in those founding documents took on meanings within the Common Law context, unless expressly redefined. In the Constitution, for instance, are found the indirect taxation terms ‘duty, impost and excise.’ Did the Founder’s understand these terms to have the meanings ascribed to them within the context of Dutch law, or French law or Spanish law? Or strictly within the confines of the Common Law?

    Their actions, fortunately, speak much louder than their words. We see from the history of the American implementation of these types of taxes that the Founder’s, and those who followed thereafter, closely abided by the prescriptions and proscriptions that had been developed under the Common Law/Liberal indirect or benefits system of taxation. A case could be made that the American’s actually followed it much closer than the British, thanks to the apportionment and uniformity requirements for direct and indirect taxes, respectively, and federalism in principle.

    This system of indirect taxation was best described by Sir William Blackstone in his ‘Commentaries on the Laws of England,’ which was by far the most popular exposition of the English Common Law in America at the time (and would be until several decades into the twentieth century). Blackstone listed nine classifications of duties or excises that were typical for the period post 1688 Glorious Revolution to his time–1750-60’s. These nine divisions included such taxes as customs or tariffs, excise duties on various and sundry commodities, salt duty, post-office or letter-carrier duty, stamp duties, duty upon houses and windows, carriage duty, auction duty, duties on all the various alcoholic beverages, and the office duty. This is just a short list.

    American legislators had copied, or adapted, a good portion of these excises for their own statutes, by the time of the Civil War. One of these excises, which wasn’t used until the Civil War, and was the last and ninth on Blackstone’s list, was the Office Duty. That’s what it was called in Blackstone’s day, but the Americans, one hundred or so years later, would choose to call it an Income Duty (or later, Tax) for reasons rendered obvious herein. Different name, same tax. And significantly, the same simple tax that today fills thousands of pages of the IRC with impenetrable legalese, that you have been told your whole life you’ll never possibly understand, can, quite to the contrary, be easily understood by reading–what those who handsomely benefit from your ignorance have conveniently hidden from you by omission–Blackstone’s ninth excise:

    “The ninth and last branch of the king’s extraordinary perpetual revenue is the duty upon offices and pensions; consisting in an annual payment of 1s. in the pound (over and above all other duties)(k) out of all salaries, fees, and perquisites, of offices and pensions payable by the crown, exceeding the value of 100l. per annum. This highly popular taxation was imposed by statute 31 Geo. II. c. 22, and is under the direction of the commissioners of the land tax.”
Footnote (k): “Previous to this, a deduction of 6d. in the pound was charged on all pensions and annuities, and all salaries, fees and wages of all offices of profit granted by or derived from the crown, in order to pay interest at the rate of three per cent. on one million, which was raised for discharging the debts on the civil list, by statutes 7 Geo. I. st. 1, c. 27; 11 Geo. I. c. 17; and 12 Geo.I. c. 2. …”

    Should the clear subject matter of this excise, as described by Blackstone, somehow escape you, don’t despair. Stephen Dowell in his 1888 ‘A History Of Taxation and Taxes in England’, Vol. III, picks up where Blackstone left off:

    “That part of the old land tax which was collected from public offices and employment–‘in respect of any public office, or employment, or any salaries, gratuities, bounty monies, rewards, fees, profits, perquisites or advantages therefrom’–had been extended, by Pitt, to ‘persons receiving annuities, pensions, stipends and other yearly payments charged upon the exchequer or any branch of the revenue, or secured to be paid by any person or persons otherwise than as a charge on lands,’ and, as thus extended, had been formed into a separate tax.”

    He is discussing the office duty component as expressed in Pitt’s Property and Income Tax, 1799-1802. Pitt’s tax, as a whole, did not perform up to expectations, with the self-assessment provisions of the direct tax portion of the tax taking the blame.

    Dowell continues the story with Addington’s Property and Income Tax, 1803-06, which remedied the faults of Pitt’s tax by providing for ‘stoppage-at-source.’ The evolving office duty, again a part of a comprehensive property and income tax statute, was expressed in Schedules C and E. Dowell helpfully summarizes them:

    “Schedule C, the tax on fundholders, in respect of profits arising from annuities payable out of any public revenues…”

    “Schedule E contained the charge on persons deriving income from any public office or employment of profit, and included also persons receiving any annuity, pension or stipend payable by the Crown or out of public revenue. The plan of this schedule was to make responsible for the payment of the tax those who paid the salary, annuity, pension or stipend, who in their turn, were to deduct the amount on paying the person entitled. This provision effectually prevented evasions, and therefore a wide sweep was given to the net, and by definition, the term ‘public office or employment’ was extended so as to include all offices in public institutions, and public foundations under any trustees or guardians of any county or municipal fund, tolls, or duties; those held under any corporation or any company or society, corporate or not corporate; and, generally, every other public office or employment of profit of a public nature.”

    (It should be noted that Schedules A, B and D of Addington’s Tax were without question general direct taxes, but were not applicable within the American federal taxation scheme because they were of the type that could not be practically or fairly apportioned.)

    Addington’s Tax was an experiment in taxation that exceeded expectations, so it undoubtedly garnered attention from the international government finance crowd. In 1815, during the War of 1812, Treasury Secretary Dallas, who would be a likely member of this crowd, suggested an income tax in the nature of an excise because it had the potential to raise multiple millions. Presumably, this tax would have been implemented had the war not abruptly ended. Was it Blackstone and the British reports of the collection amounts for each schedule of the Addington Tax that informed Secretary Dallas of its potential?

    Fast forward to the American Civil War and the government’s urgent need for revenue. The same British reports, that once informed Secretary Dallas in 1815, were now informing Secretary Chase and Ways and Means Committee Chairman Stevens of the results of the British income tax which ran from 1842 to essentially now. (All British income tax legislation for the rest of the nineteenth century was just a repeat of Addington’s 1806 income tax, Schedules A through E remained essentially the same in every edition.) This information along with Blackstone’s ninth excise discussion must have worked their same magic on the Lincoln administration and Congress, as it had on Secretary Dallas. How can Blackstone’s “highly popular taxation” recommendation possibly be ignored when revenue is needed direly? In fact, a non-apportioned income excise tax was included in the 1861 internal revenue bill, indicating Congress’s willingness to utilize the tax from the get-go, but it lacked administrative provisions and was repealed by the 1862 act. The 1862 act provided for an Income Duty and Salary Duty, both in the nature of an excise and therefore not apportioned, and were implemented along with dozens of other excises and duties. Not surprisingly, the Income Duty (Sec. 90) was clearly just an Americanized rendition of Schedule C and, likewise, the Salary Duty (Sec. 86) was just a knock-off of Schedule E. Two years later the two would be merged into one statute, as their rates were the same. (To see these two statutes from 1862 go here:

    This first American legislative expression of Blackstone’s ninth excise would run successfully until 1872 when Congress failed to extend it and it expired as per statute. Statistics from the Commissioner of Internal Revenue show that less than 1% of the population were subject to the tax, yet it would raise a quarter of all revenue collected from internal taxation. The favorable British results were successfully duplicated and Blackstone’s recommendation was once again validated.

    Whereas the American income tax only saw a ten year stint, the British income tax ran continuously, during the second half of the nineteenth century. Dowell picked two periods, 1879-80 and 1884-5, for his then current (1888) study of the tax. As mentioned previously, the tax utilized the same format established by the much earlier Addington Tax. Dowell reviews them in detail:

    “Schedule C: The third branch, termed schedule C, touches income from any public revenue, imperial, colonial, or foreign, and under this schedule the amount received is charged. The assessment, as regards dividends from the Funds and other imperial revenue, is made by commissioners for the purpose, from information derived from official documents in their possession; and the tax is deducted from the dividends or other payments and paid into the Bank to the account of the revenue. As regards income from investments in colonial or foreign government securities, the plan of the tax is to require all persons entrusted with the payment of the income in this country to deliver accounts to the SPECIAL COMMISSIONERS–in order that they may make out the assessments and raise a charge.”

    “Schedule E. A fourth branch, termed schedule E, touches persons in the employment of the state, or in other public employments of profit. The assessment and collection is easily effected, ad unguem, as regards official incomes in the strict sense of the term, in the departments concerned; while as regards other employments of profit in public corporations or companies, the treasurer or other such officer is required to do all acts requisite for the assessment of the officers of the corporation or company. The increase in the number of public companies renders this a growing schedule.”

    Dowell also included in his review a tally for the five schedules. Schedule C returned 40 million and 41 million for the 1879–80 and 1884-5 periods, respectively. Schedule E returned 26 million and 29.5 million for the same time periods, respectively. Those government finance types must have rejoiced in these numbers!

    The American income tax was revived in 1894, during the Democratic Cleveland administration, for the following main reasons: 1) political pressure from the Populists and Democrats to revive the tax, 2) a financial crisis that was wrecking havoc on the federal treasury, 3) the failure of high protective tariffs to generate adequate revenue, 4) as a remedy for the corruption that accompanied the political influence seeking ‘political entrepreneurs,’ and 5) the publication of Dowell’s work in 1888 and the glowing reports of the continued success of the British experiment in income taxation, suggested the tax once again. Unfortunately, the tax would succumb to a corrupt and specious argument oddly (some read this as corruptly) upheld by otherwise intelligent Justices of the Supreme Court, by a bare majority, in the Pollack decision of 1895.

    This brief historical exercise provides ample proof of precisely what an excise on the exercise of government privilege consists of and how it operates, no matter what the particular name given to it. You can be sure that nineteenth and early twentieth century American legislators and jurists understood it exactly as described by Blackstone and Dowell and would not confuse it with a direct tax or wish to abandon it for one (without apportionment). That’s why the Pollack decision received so much open public derision, because it ignored over 150 years of both British and American Common Law precedent. And why the purpose of the Sixteenth Amendment was to overturn the Pollack decision to return to Congress the power to tax privileged incomes, from whatever source derived (with all judicial liberties in that issue forever removed), that it had enjoyed all through the 1862-1872 era and had anticipated to enjoy in 1815 and 1894. (For the most accurate and concise discussion of the 16th Amendment ever written, go here:

    It should also be clearly evident why those who lie to you about the income tax never mention Blackstone or Dowell, or why the term excise has been systematically disassociated with the ‘modern’ income tax, or why the Sixteenth Amendment must be blatantly misrepresented to supposedly give Constitutional authority for a direct tax without apportionment, or why the Pollack and Brushaber decisions (and others) of the SCOTUS must be blatantly misrepresented or outright ignored, or why fear and bluff are used to administer the tax rather than reason and the rule of law. Duh! Its because the lie is so remarkably superficial, all they can do is cover it with elaborate and threatening ones and remove the real history from view so you can’t compare it to the lies.

    If it wasn’t for the human tendency for pragmatism, often stated as ‘to go along to get along,’ we wouldn’t be in this mess today. I urge you all to stand and speak this new found truth–one correctly filed tax return at a time. Are you engaged in the exercise of federal privilege? Possibly but most likely not. Then stop declaring that you are, under penalties of perjury no less! Learn how, and why its so imperative for freedom (regained by the end of the year, if every libertarian, especially those with bully-pulpits, stand for the truth), by reading Pete Hendrickson’s masterpiece ‘Cracking the Code, the Fascinating Truth About Taxation in America.’ Order it here:

    The truth about the income tax is the soft spot on the belly of the beast. Take advantage of it. Now, before it’s too late!

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