Summary: Nicholas Carangi, a Temple University student, at a Hillary compaign event, shook Bill Clinton’s hand and utilizing his 1st amendment right of free speech said, “Bilderberg, New World Order, how dare you?” Days later Carangi was visited by the Secret Service and questioned about his protest activities at his parents house, even though he has his own place. This can be construed as nothing more than intimidation and setting an example that if anyone speaks out defending the Constitution from tyranny they his face consequences. Please speak out against and defend your civil liberties as well as your inalienable rights against oppression. Digg the article. Watch the movie. Only knowing the truth will protect you, your family, and ultimately defend everyone against this tyrannical threat against humanity. Peace.
Last updated, 12th of October 2004.
This Resident Evil Virus FAQ, or guide, is a way of documenting what exactly each virus in the main series does. I will attempt to portray a concise picture of each virus, based on what information is available, and also dispel whatever confusion (and I’m sure there is much confusion, given the plots of Resident Evil) there is about them. I’ve tried to provide evidence where I can, so people don’t rush along and try to contradict me on every sentence because they have some whacked up theory. Of course, if you have reason to believe that something here is wrong, or you have more information to add, feel free to tell me and I’ll make amendments where they are due.
This FAQ covers:
– ‘Mother’ Virus
– Progenitor Virus
– ‘Original’ T-virus
– Nemesis Parasite
– Wesker’s virus
– RE4 virus, aka ‘Angry villager syndrome’
Hope this FAQ is useful and answers whatever questions you may have 🙂
Founders: Spencer and Edward Ashford. If any others were involved, they are not mentioned by name.
Date of founding: Unknown. All we know is that it was founded before the creation of Umbrella, and before the founding of the T-Virus.
Method of Creation: Unknown. Marcus and Spencer may either have discovered a pre-existing virus or created something new, we don’t know.
Known subjects: None. The Mother Virus is only mentioned twice, once by Alexander and once by Billy. There are no records the Mother Virus being tested on any living organisms. Actually, there are no test records whatsoever.
(First things first, I would like to say that I’d like to gouge Alexander Ashford’s eyes out with a rusty spoon for writing his damn memo, because it only serves to confuse the whole Progenitor thing even more than it already is)
One can attribute Wesker calling the Progenitor virus the ‘Founder Virus’ as a difference in translation from the Japanese files, but the supposed ‘Mother Virus’ is a bit more tricky. Alexander attributes the founding to Edward Ashford and Spencer, which clashes with Marcus’s diary entry if the PV and MV were to be the same thing.
“My father, Edward, discovered the mother virus in cooperation with Lord Spencer, who was also a nobleman.”
Initially this gives the impression that the Mother Virus and Progenitor are indeed two different things. However, what Alexander says after this makes that statement somewhat confusing:
“[Edward and Spencer] studied it for the purpose of military use. Eventually their study took shape. They named a variation of the mother virus, the “T-virus”. To camouflage their research, they established Umbrella Chemical, Inc.”
From this one would undoubtedly infer that the Mother Virus is, in fact, the Progenitor Virus. In that case, Billy’s comment about the ‘Mother virus’ at Marcus’s lab would make much more sense in that he’s referring to the research Marcus carried out on the Progenitor Virus. But then that begs the question of why a) Marcus never mentions Edward, and why b) Alexander never mentions Marcus. One can put down Marcus’s lapse to the fact that he refers to the founders as the collective “we”, and thus never mentions anyone by name. One can also put down Alexander’s lapse to Spencer’s revisionist history since he does not mention Marcus in the founding of Umbrella either. But then you’re still left without a clear picture. Spencer has never been attributed with the creation of the T-virus before, and Edward is hardly mentioned, except that he was a founder of the T-Virus project. One would hope that Alexander actually knew what his father did, but what he says in the memo brings that into question. Given that Alexander directly says that the T-virus came from the Mother Virus, I’m inclined to believe that he (like everyone else, seemingly) is simply giving the name of the Progenitor virus their own little spin. Billy’s word can’t really be taken as fact, since he’s not obviously involved. Until it’s revealed that he’s a secret Umbrella agent or something like that, I’ll put it down to ignorance and say he meant the Progenitor virus. Progenitor is also a rather specific term, so ‘Mother’ may well be a general reference.
Founders: Marcus, Spencer and Edward Ashford (Weskers 2nd report informs us of the latter).
Date of founding: 4th of December, year unknown. Most likely in the mid to late 60’s, since the diary entry takes place before the founding of Umbrella.
Method of creation: Unknown. Possibly through experimentation with the Mother virus, although given the above information, they may be the one and same anyway.
Known subjects: Lisa Trevor, Jessica Trevor, insects, frogs and monkeys.
n. 1.A direct ancestor.
2.An originator of a line of descent; a precursor.
3.An originator; a founder: progenitors of the new music.
Little is known about the ‘Founder virus’, as it is called by Wesker in his 2nd report, although at least this time there are no discrepancies as to who created it. According to Marcus anyway.
“We finally did it…. the new virus! We have called it the “Progenitor”. I want to carry it back and start detailed investigations immediately.”
The Progenitor virus was to be the base for Marcus’s T virus, although one file puts the “progenitor” as being an early stage T virus. I put that down to ambiguous wording and random plot-hole attempts, however, and the fact that Birkin was attributed with the T-Virus founding. Marcus’s T-virus may well have been considered a prototype for Birkin’s research. Unless, of course, they were just talking about the Progenitor as a precursor to the T-virus.
“There we found evidence of Dr. Marcus’ research into the T-Virus prototype called “Progenitor””
We do know from Wesker’s 2nd report that it is an RNA virus similar to Ebola, but its exact properties or propensity for mutation are not fully known. Lisa Trevor was infected with the virus early on and seemed to suffer little side-effects, although one can’t say for sure if that was because of the virus itself or the G-virus which was found in her. It can be deduced that the Progenitor virus does affect human behavior however, since when Lisa was first injected with it, her behavior altered; she began to attack researchers and rip off their faces. She regressed during her years of treatment, but the behavior resurfaced again after the Nemesis injection. There must have been something unsuitable for the Progenitor virus as far as biological weapons were concerned, since various researchers struggled to improve upon it. But it’s exact properties are as-of-yet unknown.
There are a few articles in 0 which allude to the capabilities of the Progenitor Virus.
“When the Progenitor virus is administrated to living organisms [non-human, in this case], violent cellular changes cause a breakdown in the system, Furthermore, no satisfactory method has been found to control the organisms for use as weapons. Clearly, greater co-ordination at the cellular level is essential to enable further growth.
– Perhaps because of these ancient animals have been genetically stable for millennia, when administered with the progenitor virus they exhibited only explosive high-energy growth and increased aggressiveness. It is extremely difficult to envision using them as a BOW.
– Injecting a frog with the virus resulted in an increase in leaping power and abnormal tongue growth. However, no change in mental ability is observed. Furthermore, an abnormal resulted in the test subject randomly attacking all moving objects. Usefulness for BOW is limited.
-The progenitor virus was merged with the monkey’s cellular DNA, resulting in an increase in fertility. The resulting young exhibited improved aggressiveness and some increased mental capacity. (As a side effect, the visual power was lost, but this offset by an improvement in hearing ability). However, they were unsatisfactory as weapons. It does seem that no progress can be made without making humans as the base organism.”
Marcus also administered the T-virus to his leeches, although given that the T-virus was a mix of the Progenitor and Leech DNA, one can infer information about the Progenitor virus from them (I mean, what is leech DNA going to do to a leech anyway?).
“…they [learned] from experience, and are beginning to exhibit group attack behavior. They are also ceasing cannibalism. Their evolution is exceeding expectations… The leeches no longer exhibit individual behavior, even when not feeding, they move as a collective. They consume everything I offer with remarkable efficiency.”
There is also one article in the Remake regarding the administration of the virus to Lisa and Jessica Trevor.
“Nov. 10, 1967
– Progenitor virus administered
Administered virus: Type-A
Plasmolyzing of tissue during cell activation
Virus fusion: Negative
Administered virus: Type-B
Plasmolyzing of tissue during cell activation
Virus fusion: Positive but delayed fusion.
Body modification: Observed constant results.
Status: Continue protective observation.”
It seems credible to say that while the Progenitor virus caused changes in cells, it was not the degenerative type which was to be found in Birkin’s subsequent T-virus. But there seems to be an emphasis on mental changes within infected subjects. Lisa’s abnormal and aggressive behavior, the new-found group mentality of the Leeches, etc… A possible reason of why the Progenitor virus was improved upon was because it lacked desired physical mutations, and made the subjects mentally unstable and prone to aggression.
Date of founding: 19th of September, year unknown. Most likely late 70’s, as the diary entry records it as being after the founding of Umbrella and the construction of the Arklay laboratories.
Method of creation: Mixing the Progenitor Virus with the genetic material of leeches.
Known subjects: Assistant researchers, rats. Primarily leeches, since Marcus was obsessed with them.
“At last.. I’ve discovered a way to build a new virus type with “Progenitor” as a base. Mixing it with leech DNA was a breakthrough I needed.. I call this new virus “T”, for “Tyrant”.”
Marcus was taken over by one of his subject leeches after his assassination by Spencer. He subsequently underwent an amazing face-lift on Capcom’s part, managing to have some overlord power over a horde of leeches. Quite possibly one of the strangest virus’s seen so far, although Marcus’s corpse being taken over could have implications with the parasitic qualities of the Nemesis virus (speculation on my part…). Leeches seem able to replicate the appearance of Marcus down to his wrinkles and bald head, create humanoid structures, propagate through eggs and possibly rejuvenate cell structures. It’s also highly likely that they can infect people through touch.
“Rumour has it that there’s something dangerous about those leeches. It is true that when Dennis just touched one, he got ill with a fever. Again today.. There were those horrible moans. Beyond that door, “let sleeping dogs…” No way I’ll go near them. Even if the Director tells me, I no way want to end up like Dennis. That poor bastard. Scratching and scratching. Makes me itch just watching him.”
I’ll assume that Billy and Rebecca not being infected is just due to the Super!Immunity granted to all Resident Evil characters.
The founding of the T-virus is sometimes attributed to Birkin in later documents, probably a part of Spencer’s plan to erase Marcus from Umbrella’s history. Also there is evidence to support that Marcus’s research wasn’t as close a held secret as he would have liked, and that Spencer or Birkin were able to get hold of parts of his research for their own T-Virus project.
The devices I set to protect my work have been disturbed, it appears someone came looking for “T” and the leeches. Fool. No doubt it’s Spencer’s group.
Today, I again found evidence of tampering around the entrance to the labs. If that is what they’re after, I must find a suitable way to deal with them. Perhaps I should have William and Albert smoke out the pest…”
Date of Founding: Unknown. Some time between Marcus founding the original T-virus and his death.
Method of Creation: Mixing the original T-virus with the Ebola virus.
Known subjects: Humans (Zombies and subsequent Tyrants), dogs (MA-39 Cerberus), reptiles (later to become the MA-121 Hunter), sharks (Fi-3 Neptune), snakes, insects, plants (Plant 42).
“In order to manufacture the ‘Human Biological Weapon’ from the ‘Founder Virus’, it was necessary to develop a variant with that particular peculiarity enhanced. That was the T-Virus project…. Birkin wondered if he could combine the mutated ‘Founder Virus’ to enhance its peculiarity. The sample of Ebola Virus had already arrived at his laboratory”
There are several strains of the T-Virus, but the one most widely seen in the game is the one Birkin created by mixing the Ebola virus with the “mutated ‘Founder Virus'”, which is most probably a strain of Marcus’s T-Virus. Given the wording, it’s possible that the Progenitor virus was the base, but one would be inclined to believe that by the time Birkin got his hands on it, enough progress had been made to have altered it to at least a prototype T-virus stage. The difference with Birkin’s T-virus and Marcus’s is that Marcus was obsessed with the leeches he used, and thus never really strayed his research out of that particular sphere. Birkin, on the other hand, worked under Spencer’s orders to develop it to be more potent, experimenting more with developing Tyrants and the like. Also, since Marcus ceased research upon his death, the virus which leaked from his lab is different to that which leaked from Birkin’s lab in Raccoon City.
The virus itself is a degenerative one which attacks the hosts cells and makes their level of intelligence decline, creating the well known ‘zombies’. In a few cases, if the hosts genetic material is suitable enough, then they will become a Tyrant. However the success rate for Tyrants was so low that it led to a standstill in Birkin’s research for several years. The T-Virus has a large potential for infecting other species, and the results are mostly predictable. The way it is transmitted from host to host really depends on the plot, so finding a definitive answer is near impossible. Further mutation of the host can be achieved through external influences.
In addition to that, several advancements were made with successful subjects of the T-Virus.
According to Wesker, the Hunters were a side project of Birkin’s using a sort of cross-genetic program with humans infected by the T-virus, and presumably reptilian genetic information.
“Apart from Spencer’s intention, Birkin was engineering a biological weapon with increased emphasis on its ability to fight. He was trying to create it not only through mutating human genes with the T-Virus, but also by adding another creature’s genetic information. The fighting living biological weapon would kill all human being, including those wearing body armor, or equipped with biological warfare suits and those humans who escaped from death through infection. It was later called ‘The Hunter’”
Crimson heads: “There is now evidence that when the host loses consciousness, the body goes into a dormant state. During this time the virus becomes active and rapidly transforms and reconstructs the basic composition of the body. The host eventually mutated into a humanoid creature. (We call them V- ACTs). Its speed and amazing muscular development are particularly noteworthy. After transformation, it becomes more agile and aggressive. Already four of our researchers have died from trying to feed it, turning the place into an instant blood bath. (Ever since this tragic and barbaric accident, we have decided to call its kind “Crimson Heads”)”.
The appearance of the Crimson Heads lends one to think that Lickers are the more advanced form of this, although other documentation refutes this assumption; Lickers are merely zombies which have been inflicted with a double dose of the T-virus. Although given the ‘regeneration’, as it were, of normal zombies into Crimson Heads, the Licker evolution theory does have its merits.
This document appears in 0, and the virus was being worked on around the time of the 1998 breakout. We don’t really know which lab was working on this project, since all we know is that the investigation was carried out by Umbrella. It’s most likely Birkin’s lab, although the fact that they specifically refer to the “Raccoon city” newspapers and TV stations does suggest that they’re an out-of-towner. Possibly a project that was being worked on in a European lab, but again, we really don’t know. Ths document is, for the most part, merely a how-to-kill sheet for the scorpion mini-boss, so it may have no relative significance at all.
Unfortunately, the test production of B.O.W. (Type-Y139) had to be suspended because of this investigation. It’s the same with Type-Y139. There’s still so much we don’t know about responses to the crustacean T-virus. There’s a lot of interesting research left depending on the species and nurturing conditions, only minute doses of T bring about remarkable changes in solidity, size, multiplication of internal toxins, and brain development. If these effects can be controlled, a powerful weapon could be produced. But the sudden development of the shell results in a corresponding fragility. Certain areas become exceedingly weak. Problematically, one of these areas is the head carapace. This lab we are going to-were they pursuing the same research? It would certainly help to find data and samples that would help us in our research.
The day is finally approaching… I am growing more anxious. The Raccoon City newspapers and TV stations are full of reports about bizarre murders in the suburbs. It can’t be the virus. Can it? If it is… No. I can’t think of that now. I have to concentrate on this investigation and make sure it goes smoothly.”
Founder: Alexia Ashford
Date of Founding: No exact date is given, but it would have had to have been between 1981-83
Method of Creation: Mixing the T-Virus with an ancient virus found in a queen ant.
Known Subjects: Alexander Ashford, Alexia Ashford, Steve Burnside.
“After discovering the remains of an ancient virus within the genes of a queen ant, I have been concentrating on the research of ants. The ecosystem of the ants seems truly ideal to me. There is one queen ant in each anthill, and the soldier and worker ants are the queen’s slaves.”
Although the virus she worked with to create Veronica is never named, it can be assumed from the suffix that it was the T-virus. Research on it appeared to be somewhat of an ‘in’ thing as well, according to her father, Alexander.
“…We are now at a major disadvantage against the other researchers, as there is great competition in the field of T-virus research. I have disgraced the honourable name of the Ashford family that out great ancestor Veronica established. If nothing is done, Umbrella will be taken over by Spencer.”
Alexia (well.. and Steve too, I suppose, but he died.) is the only person to be fully and successfully infected with it, and it requires quite a long stint of hibernation for the virus to propagate itself in the host without being rejected.
“I will suppress the activity of the virus at an ultra-low temperature, so that my cells will change slowly. My calculations indicate that it will take 15 years before my body will gain immunity, and become able to coexist with the virus.”
It was quite powerful and effective when it actually worked, giving Alexia a kind of control-over-lesser-drones sort of thing, and let her fling burning substances from her hands. But given the propensity for rejection unless given long amounts of time for the body to accommodate the virus, it was pretty useless.
“I used my otherwise useless father as a test subject. However, as I expected, the virus caused a rapid change in his cells, triggering the complete destruction of his brain cells and body flesh.”
Wesker currently has a sample of the T-Veronica virus, however, thanks to Steve’s corpse. If he really is dead, that is (you can never be sure these days)
Founder: Unknown. Researched in the French laboratories.
Date of Founding: Unknown. A prototype was made available to the Arklay labs in 1988, so it would have been created around that time.
Method of Creation: Unknown. All we know is that it’s a ‘third generation B.O.W’
Known subjects: Lisa Trevor, humans, whoever Nemesis is in 3….
Woe is the poor person who gets infected with this, as it makes you look like the product of a child who’s had too much fun with the play-doh and a garlic crusher. The maker of the Nemesis is unknown, as it was developed in Europe in the Paris facilities. The ‘Nemesis Project’ was an attempt to create a third generation B.O.W, which looking at the lineage would lend one to suspect that it was a product of the 2nd generation Progenitor Virus (does anyone really know where Marcus and Spencer worked before moving to the Arklay region labs anyway?). Or, depending on your views on the Mother Virus/Progenitor Virus thing, it could be a product of the T-virus. Wesker’s report gives us liberal amount of information on the Nemesis Prototype sample which was sent to the Arklay laboratories in 1988.
“A parasitic living body, created by genetic modification – That was Nemesis. A living body with intelligence, which was unable to do anything on its own. However, once it parisitised the brain of another living being, it would take full control of the body and demonstrate its highly developed aptitude for combat. The project was to provide the intelligence and the biological body for combat separately and then combine them in order to create one living biological weapon.”
However, Wesker points out that the Nemisis project, like The Tyrant, had a fatal flaw.
“On the report attached to the sample, we saw nothing but a long list of deaths. The carriers lasted for only five minutes after Nemesis took control of their brains”
So judging from the report, The Nemesis seems to suffer from a similar fate as trying to create Tyrants. The success rate is extremely low, and as such, Nemesis-type creature are few and far between. By RE3 they appear to have made few successful gains with the project.
Date of Founding: 1988.
Method of Creation: What was to become the G-virus was found inside Lisa Trevor’s body when she was infected with the Nemesis Parasite.
Known Subjects: Birkin, Sherry (embryo)
The G strain was created when the third generation Nemesis Parasite, created in the French laboratories, was tested on Lisa Trevor, a woman who had somehow survived years of experiments with dozens of viruses. When the Nemesis seemed to just disappear from her system, Birkin and Wesker investigated further into how she had survived for so long. What they found in her was to become Birkin’s pet project, the G-virus, which he worked on for ten years. It had been residing in her, taking in all the viruses she had been infected with and mutating her body to accommodate for them.
William Birkin’s research notes:
“The discovery of the G-Virus was in fact 21 years after the administration of the progenitor virus. The “Prototype Parasite” which we had delivered from a laboratory in France was administered to the sample specimen. The sample specimen took in the parasite without showing any signs of adverse reaction. The lack of any reaction was an unsolved mystery. But now everything is clear to me. The “Prototype Parasite” was incubating in the sample specimen’s body for 21 years. Then from that incubating state the prototype suddenly mutated. (“Evolved” may be a more appropriate word to describe it.) [is it just me or does that not make sense? Maybe he means the Nemesis reacted to the Progenitor virus which had been inside her for 21 years]
This observation gave me more insight in my research. Through further modification and testing, I was able to derive a method to create the “G” that surpasses the performance of the “T”.“
Subsequently, the G-virus is far more unpredictable than the T-virus because once it’s in the host, it continues to mutate until it dies. Similar to the Nemesis virus, the G-virus also has the capacity to spread through embryonic impregnation, with a higher success rate for those of similar genetic structure to those who spawned the original parasitic embryo.
“Any beings infected by the G-Virus will reproduce through impregnation of an embryo within another living being. Unless rejected by the host, the embryo will undertake a process of gradual cellular invasion,infecting the host’s cells on a molecular level as it rewrites their DNA. Once the metamorphosis is complete,the host will be capable of continuing this cycle of self-reproduction.”
Founder: William Birkin
Date of Founding: Unknown. It was made available to Wesker during the 1998 Mansion incident.
Method of Creation: Unknown. One would assume that it would have been a derivative of either the T-virus or G-virus projects, but it doesn’t seem to share many of the traits of those viruses. Another theory is that, given Wesker’s alignment with the Hunters in CV, it is somehow related to them.
Known Subjects: Albert Wesker.
Giving Wesker super-human powers might have sounded like a great idea at the time for Capcom. But the logicality of it presents one of the biggest plotholes in the story. Wesker states that it was a special project Birkin was working on for him, and that when administered it would render him in a coma-like state until he woke up. The main problem with Wesker’s Virus is that if it works so bloody well, why is everyone else stuck working with such primitive viruses?
One explanation could be the nature of the virus itself. It was developed specifically for Wesker, and not a mass-population. Most viruses suffer setbacks because they are intended for maximum affect on a large number of people. Wesker and Birkin had been working together for a while, so it is not impossible for a large amount of genetic data to have been collected on Wesker so that the virus had no chance for rejection. On the downside, it would only work on Wesker.
Also, in retrospect Wesker’s Virus is actually not that suitable as a B.O.W. The main reason being that it renders no mental side-effects on the victim. If you want a useful weapon, what you don’t want is one that’s too smart for its own good. What the Virus actually did to Wesker was basically;
-> Saved him from being turned into a corpse by the Tyrant in the first game
-> Upped his speed, agility and power
-> Endowed him with some cool eyes (Their reptilian appearance being the root of the Hunter theory)
The Virus produced no visibly physical mutations or side-effects apart from his eyes, suggesting that it wasn’t a very potent virus. Rather, his physical abilities became above-par compared to everyone else. In contrast, he pretty much gets his ass kicked by Alexia, proving that while his virus may not turn its victims into twitching zombies with very few brain cells, it has a long way to go with regards to being the ultimate B.O.W.
Founder: Unknown. Given the approximation between Spain (where the village appears to reside) and France gives rise to speculation that it could heva been researched in a Paris or European facility. Of course, we don’t even know if Umbrella is behind it, so it’s impossible to tell anything at this stage.
Date of Founding: Unknown. Presumably some time within the six years which have transpired between the Raccoon City breakout and RE4. Method of Creation: Unknown. Theories range wildly, and the only solid evidence we have on it is that it is not the T-virus. A likely suspect, especially given the old RE4 trailer, is that it’s related to the Progenitor Virus.
Known Subjects: The residents of a small European village. Some aquatic creatures.
The ‘infection’ in Resident Evil 4 is proving to be one of much debate, since it has been stated by Mikami that there will be no ‘zombies’ in the game. Of course, the definition for a zombie gives somewhat of a wide birth for theorising. If we look at all the previous games, a zombie has always been someone who has lost conscious control of their body. Their level of intelligence has declined to a point where they are no longer individual human beings. Rather they are just mobile pieces of human flesh, driven by the basest of instincts to seek out other victims. So the villagers indeed do not fit into this description; they display a marked level of intelligence, and their bodies are not mutated or decaying. But that does not mean they haven’t been infected with some kind of virus. What this virus is, we can only begin to speculate.
Right now, the only solid evidence we have is that they are not infected with the T-Virus. Looking at the picture of the ‘ogre’ creature, it would appear that there is some level of evolution to the condition of the villagers. It looks humanoid, is wearing the remnants of human clothes, and judging from the rope around its neck it had been restrained in some way. Its obvious that some sort of experimentation has been taking place, but without solid evidence we can only speculate. Whatever it is, it doesn’t seem to have the degenerative qualities of the T-virus, or the unpredictable and mutative qualities of the G-virus. If it is to be a form of a pre-existing virus, my guess is that given the effects of the Progenitor virus on its victims (more of an emphasis on mental changes, and lesser physical degeneration) that it’s a derivative form of that virus. The other, more likely theory is that it’s something new altogether.
However, without more information we can only guess at the possibilities.
This report is adapted from two articles by G. Edward Griffin
appearing in the April 13, 1987 and February 29, 1988 issues of THE NEW AMERICAN.
Mr. Griffin, a journalist and film producer, is the author of
The Creature From Jekyll Island: A Second Look at the Federal Reserve.
I wonder where the nearest tax office is?
It is a sobering thought that the federal government could operate – even at its current level of spending – without collecting any taxes whatsoever. All it has to do is create new money through the Federal Reserve System, a process called monetizing the debt. As a matter of fact, much of the money it now spends is obtained that way. The politicians who authorize that process know that this is not true debt, because no one in Washington really expects to repay it. It is merely a means of raising money to run the government without increasing taxes. Actually, the inflation that results from monetizing debt is just as much a tax as any other, but, because it is hidden and so few Americans understand how it works, it is far easier to collect than a tax that is out in the open.
So the question arises: Why does the federal government bother with taxes at all? Why not just operate on monetized debt? The answer is twofold. First, if it did, people would begin to wonder where the money is coming from, and that might cause them to wake up to the reality that inflation is a tax. Thus, open taxes, at some level at least, serve to perpetuate public ignorance regarding the reality of deficit spending. But the second reason is more to the point of this report. It is that taxes, particularly progressive taxes, are weapons by which social planners can wage war on one class of citizens for the benefit of another.
Tool for Social Planning
The January 1946 issue of American Affairs carried an article by Beardsley Ruml, who at the time was chairman of the Federal Reserve Bank of New York. Ruml devised the system of automatic withholding during World War II, so he was well qualified to speak on the nature and purpose of the federal income tax. His theme was spelled out in the title of his article: “Taxes for Revenue Are Obsolete.”
In the introduction to the article, the magazine’s editor summarized that Ruml’s “thesis is that, given control of a central banking system and an incontrovertible currency [a currency not backed by gold], a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue. All taxation, therefore, should be regarded from the point of view of social and economic consequences.”
Ruml explained that, since taxes are no longer needed to raise revenue for the government, there are only two purposes remaining. The first of these is to combat increases in the general price level. When people have money in their pockets they will spend it for goods and services, and this will bid up prices. The solution, wrote Ruml, is to take the money away from them and let the government spend it instead. This, too, will bid up prices, but never mind about that. Ruml explained it this way:
The dollars the government spends become purchasing power in the hands of the people who have received them. The dollars the government takes by taxes cannot be spent by the people, and therefore, these dollars can no longer be used to acquire the things which are available for sale. Taxation is, therefore, an instrument of the first importance in the administration of any fiscal and monetary policy.
The other purpose of taxation, according to Ruml, is to redistribute the wealth from one class of citizens to another. This must always be done in the name of social justice or equality, but the real objective is to override the free market and bring society under the control of the master planners. Ruml said:
The second principal purpose of federal taxes is to attain more equality of wealth and of income than would result from economic forces working alone. The taxes which are effective for this purpose are the progressive individual income tax, the progressive estate tax, and the gift tax. What these taxes should be depends on public policy with respect to the distribution of wealth and income. These taxes should be defended and attacked in terms of their effect on the character of American life, not as revenue measures.
Ruml’s view will not be startling to anyone familiar with how the income tax came into existence. Beginning with the War Between the States, the Marxist philosophy of class conflict became manifest in America. Many people wrongly believe that Marxism is a battle of the poor against the rich. In reality, it is a campaign against the middle class – the class that Karl Marx called the bourgeoisie. In The Communist Manifesto, Marx wrote: “The distinguishing feature of Communism is, not the abolition of private property generally, but the abolition of bourgeois property.” In order to accomplish this, he called for a “heavy progressive or graduated income tax.”
Soaking the Rich?
Once this concept of class warfare had been transplanted to America, it found nourishment in the labor movement and eventually blossomed into a powerful political movement known as populism. The populists claimed that the farmers and the urban working class were being exploited by rich industrialists, largely through the unfair way in which taxes were levied. At that time, the nation’s revenue was drawn primarily from internal excise taxes on the sale of such items as tobacco and liquor, and from tariffs on imports. Today, tariffs are viewed as a means of protecting jobs for American workers, but in the political debates of the 1890s they were seen as subsidies for big business, a means of protecting them from the rigors of foreign competition, thus allowing bloated profits that would not be possible without political protection. Furthermore, since these tariffs were passed along to the consumer in the form of higher prices, they were viewed as nothing but a tax levied against the little man to perpetuate the unearned profits of the rich.*
The populists advocated the elimination of tariffs and the institution in their place of a progressive income tax. The move was perceived as an act of justice and revenge. The rich, at long last, were going to be forced to pay their fair share – and more. In the House of Representatives, Congressman Thomas J. Hudson of Kansas expressed the prevailing populist sentiment: “I know that many wealthy men are generous and charitable…. On the other hand, the majority of the very wealthy are haughty, overbearing, autocratic, mean, and it is that class in particular that the income tax is designed to reach.”
Yes, working, middle class Americans were in the firm majority, and any politician who promised to “soak the rich” was assured of victory at the polls. How ironic it was that those same politicians came from some of the wealthiest families in the world. Little did the common voters realize that in their greed to shift the tax burden to others, they were, in fact, placing that burden more heavily on themselves.
Our “progressive” income tax is not progressive at all. In fact, it is not even proportionate. If we had a flat-rate income tax with no exemptions or deductions, a person with 20 times the income of another would pay 20 times as much tax. By contrast, a progressive or graduated income tax may require a person with 20 times the income of another to pay considerably more than 20 times as much tax. But the way it was designed to operate is quite different. The same year that the income tax was adopted, Congress also created the tax-exempt foundation, a device whereby, under cover of charity and education, those family dynasties with great wealth can avoid paying either income tax or inheritance tax, while their fortunes remain under their control and continue to operate for their benefit.
Not far behind the super rich come the very rich, who also share in the spoils system. Over the years, the tax laws have become twisted and turned into a Gordian knot of exemptions, deductions, depreciations, shelters, and credits. Those with sufficient wealth can well afford to hire professionals to trace these convoluted paths, but the common man must be content with “standard” deductions and the crumb of a “simplified” tax return.
The federal income tax was never meant to treat all citizens alike. It will never be fair because it was designed to be unfair. Furthermore, it is difficult to imagine a tax that is more cumbersome and expensive to administer. So that each individual’s income may be determined, the taxpayer must produce documentation on every aspect of his financial life. In order to assure compliance, a virtual army of agents, auditors, and computer technicians must be maintained at public expense. In the dust of this roving army are the hordes of camp followers, the accountants and tax attorneys, all of whom consume massive chunks of the national wealth without producing anything except paperwork and procedures just to measure income. In the process, every detail of our lives is recorded and made available to the bureaucracy. The right to privacy and protection against arbitrary search and seizure is trampled underfoot.
The income tax cannot be reformed. Its heart and soul are favoritism. Its muscle is political power. Its nature is waste and tyranny. It must be completely replaced.
But what should replace it? The world has been exposed to just about every kind of tax imaginable at some point in history. Nations have tried property tax, production tax, excise tax, import tax, manufacturing tax, carriage tax, window tax, chimney tax, liquor tax, tobacco tax, income tax, sales tax, value-added tax, and even a tax on death. The results have almost always been the same. The taxes become despised by the people and often lead to revolt or civil war.
Fortunately, in our search for a fair tax that raises sufficient revenue, we do not have to begin from scratch. It may come as a surprise to learn that much of the work has been done and that the bulk of the plan has been drafted. Furthermore, it has actually been tested in America and found to be entirely workable. Where is this plan to be found? It is hidden where it is most unlikely to be discovered by the general public or Congress. It is in the Constitution of the United States.
After the Revolutionary War was won there was no way the colonists were going to create a new centralized government with the power to tax. They had had enough of that with England. So when the Articles of Confederation were finalized, they granted no taxing power at all. Whatever was needed had to be requested from the states, and the states were under no firm obligation to pay. Within a few years the impracticality of this arrangement was painfully obvious. The federal government had almost no funds with which to operate and, in fact, Congress did absolutely nothing for four years.
It is possible that the United States would have disintegrated into 13 separate nations with no way to protect themselves from foreign aggression had it not been for a series of tax revolts within the states. The most famous of these was Shay’s Rebellion of 1786-87 in Massachusetts. In protest over excessive taxes levied by the state, a brigade of 2,000 armed insurgents blockaded the Springfield courthouse. The band was eventually dispersed by a few cannon volleys, but the incident served to dramatize the fact that none of the states was really prepared for military action on any sizable scale. The disturbance emphasized the need for a stronger central government, and a convention was called for the purpose of revising the Articles of Confederation.
Once the convention was assembled in Philadelphia, the delegates quickly abandoned the idea of trying to revise the Articles. They were too flawed for repair. Everyone now agreed that the central government simply could not function unless it had some power of taxation. But what would that power be?
The overriding concern for all was that the new tax must act equally on the majority and the minority. Regardless of which citizens might find themselves in the majority, they must not be allowed to tax others in any way beyond what they tax themselves. There was unanimous consent on this principle.
Another principle was a direct outgrowth of the tradition of no taxation without representation. The colonists had just fought a war to establish that point. Conversely, if one has representation, then he must pay taxes. Since the whole purpose of representation was to consent – or object – to the levying of taxes, it follows that no one should have a voice in these matters who is not paying those taxes. All citizens are entitled to equal protection under the law, but only those who pay taxes shall be entitled to vote.
In an attempt to apply these broad principles of taxation, the convention delegates struggled with very practical problems. The seaboard states with extensive commercial shipping were reluctant to give up their right to collect import duties, because it was their main source of revenue. Those from the industrialized areas were fearful of taxes placed on manufacturing. Those from the agricultural provinces were hostile to land taxes. All parties were convinced that sooner or later a political majority would seize control and force them, as a potential minority, into tax servitude. After months of debate, it began to appear that the states were in hopeless deadlock. Then – many are convinced it was by divine intervention – a compromise was reached. No, it was more than a compromise. It was an absolutely brilliant plan for taxation. Unfortunately, it was never given a formal name. Those who drafted it were content merely to describe it in terms of its features. For the purposes of this report, however, we shall call it the “Uniform Apportionment Tax.”
The Constitution acknowledges two kinds of taxes: direct and indirect. Direct taxes, as the name implies, are charged directly to the person who ultimately pays them. Examples of direct taxes are income and property taxes. Although they may be thought of as taxes on income or on property, remember that only people pay taxes: Money and property do not. Direct taxes, therefore, regardless of what they may be based on are charged directly to the ultimate taxpayer. Indirect taxes, on the other hand, are levied on a commodity with the expectation that the taxes will be passed along to the consumer as part of the market price of the commodity. Examples of indirect taxes are import and excise taxes. The taxpayer always knows when he is paying a direct tax, but is often unaware of the indirect tax.
Danger of Direct Taxes
Direct taxes were viewed by the Founding Fathers as dangerous because they give government great power over its citizens and also because, in order to assess such taxes, agents must have the authority to snoop into the private lives of the citizens. They agreed, therefore, that direct taxes are safer if administered by the states, where elected representatives are closer to the people and easier to control.
Indirect taxes, on the other hand, were viewed as less dangerous, because people could avoid them if they wanted merely by not purchasing the items being taxed. This assumes the establishment of taxes only on those items that are considered nonessential, such as liquor and tobacco, often called luxury taxes. Furthermore, the process of collecting indirect taxes does not endanger the individual’s right of privacy.
For these reasons, the delegates to the Constitutional Convention agreed that indirect taxes would be more appropriate for the federal government. The compromise that allowed the states “to form a more perfect union” consisted of two provisions:
1) The federal government was to derive its primary revenue from indirect taxes, and these were to be uniform in all states.
2) In the event of war or similar emergencies, the federal government, with the consent of Congress, would have authority to levy direct taxes “passed through” the states to their citizens, but these were to be proportional to the number of representatives that each state had in Congress.
This process is called apportionment. In other words, if there were 100 representatives in Congress, and the state of Virginia had seven of them, the voters in Virginia would have to pay seven percent of the direct national, emergency tax. The specific wording establishing the Uniform Apportionment Tax is found in Article I of the Constitution, and specifies:
Representatives and direct taxes shall be apportioned among the several states which may be included within this Union…. The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States…. No capitation [a head tax, sometimes called a poll tax], or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.
A sample of the extensive historical record of the founding era demonstrates the reasoning of the men who created the concept. Alexander Hamilton, who was to become the first Secretary of the Treasury, wrote in The Federalist, #21:
Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will in time find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions…. If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds…. Impositions of this kind usually fall under the denomination of indirect taxes, and must for a long time constitute the chief part of the revenue raised in this country. Those of the direct kind, which principally relate to land and buildings, may admit of a rule of apportionment.
It was a cardinal point to these discussions that the power of direct taxation through apportionment was to be exercised only to pay for debt incurred as a result of war, insurrection, or similar emergencies, but not for the normal operation of the federal government. That function was to be financed by indirect taxes alone. James Madison commented:
When, therefore, direct taxes are not necessary, they will not be recurred to…. It can be of little advantage to those in power to raise money in a manner oppressive to the people…. Direct taxes will only be recurred to for great purposes…. If this country should be engaged in war – and I conceive that we ought to provide for the possibility of such a case – how would it be carried on?… How is it possible a war could be supported without money or credit? And would it be possible for a government to have credit without having the power of raising money? No; it would be impossible for any government, in such a case, to defend itself. Then I say, sir, that it is necessary to establish funds for extraordinary exigencies, and to give this power to the general government.
To the Founding Fathers, the primary purpose of apportionment was to block the central government from using the power of direct taxation – except in times of great national emergency. The barrier was not in the formula of distributing the tax load among the states, but in the procedure for doing so. To lay a direct tax, Congress had to do certain things that no government wants to do. Since each tax is a separate project, each would have to be written into a revenue act. The purpose and the amount of the tax would have to be clearly stated, and then debated and voted upon. When the tax was collected, the revenue act would expire, and the door to more money would be closed.
How different this is from the ongoing power of general taxation, under which the purpose is seldom known, the amount is always in doubt, and the process is endless. The rule of apportionment, therefore, was the greatest restraint on the power and reach of government that had yet been devised by man, and it is little wonder that it became a thorn in the side of federal politicians in the years to follow.
Of course, the Uniform Apportionment Tax was not flawless. In truth, there can never be a perfect tax if the people cannot afford it. When Hamilton became the first Secretary of the Treasury, he persuaded Congress to authorize the nation’s first indirect tax. It was an excise on whiskey, a few luxury items, auction sales, and negotiable instruments. It was excellent in theory, but it was a heavy tax – resulting in a whopping 25 percent increase in prices – and it led to a full-scale revolt. Rumors quickly spread that the government was about to extend these taxes to all articles of consumption, including food and clothing. This would be the European experience all over again. Excessive excise taxes were what had driven many immigrants to seek refuge in America. So it is not surprising that this first experiment was met with large-scale public resistance.
The biggest ruckus came from the Western farmers. Because there was a shortage of money along the frontier, it had become common to use whiskey as a medium of exchange. Grain was too bulky for transport, so the farmers grew rye, distilled it into whiskey, and moved their produce into national trade in that form. For the frontiersman, therefore, a tax on whiskey was not an excise tax or luxury tax at all. It was a 25 percent tax on their basic crop, and they complained that no other farmers and no other producers of manufactured goods had to pay a similar tax – which was quite true. By 1794 the entire region was in open revolt. Tax collectors were tarred and feathered and their houses were burned to the ground. When a judge of the Supreme Court declared a state of insurrection in western Pennsylvania, President Washington called out the militia from adjacent states and, in a show of force, led these troops in full-dress uniform.
Fortunately, military confrontation was averted: The rebels surrendered in return for amnesty, no one went to jail, and within a few months the excise tax was repealed.
First Direct Tax
In 1798, Congress levied its first direct tax. It was in the amount of $2 million and was apportioned among the states on the basis of the current census, which was also the basis for the number of representatives each state had in Congress. The purpose of the tax was to extinguish part of the debt incurred by the Revolutionary War. Reduction of the national debt was viewed as one of those rare emergencies that would justify resorting to the extreme measure of a direct tax. In this case, the tax was levied on dwellings, land, and slaves. It did not provide for any deductions or exemptions, but, sadly, it was progressive in nature, with larger homes paying more per $100 of value than others.
Herein lay one of the hidden flaws in the tax concept of the Founding Fathers. They had inherited the feudal concept of noblesse oblige, the obligation of noblemen to take care of their inferiors and assume greater responsibility of government. By 1776, however, especially in America, this concept had lost its virtue. In a republic such as ours, there is no justification for allowing class distinctions into the law – and that includes tax law. If one class can be exempted from taxes on the basis of class, rank, or wealth, then that same group can be singled out later for extra taxes on the same basis, depending merely on the political majority at the time. The principle of taxing those with wealth at a higher rate than others must have seemed harmless at the time – perhaps even humanitarian – but it was destined to fester into a huge boil that would torment Americans for many generations to come.
All of these issues aside, the fact remains that the first direct tax in the United States was entirely constitutional. Congress had stated the purpose and the amount. It had been debated and passed. Most important, once collected, the tax would expire. In spite of these constraints, however, the tax met with considerable resistance and, in fact, soon led to a second revolt, this one among German settlers along the Eastern Seaboard. Pennsylvania’s quota of the $2 million tax was $273,000, which fell mainly on land and houses. The valuation of houses was estimated by counting the number and size of windows, a practice inherited from England. But when the tax assessors arrived, the German residents thought they were reviving the hated European hearth tax. They organized into small bands and set out to assault the assessors and drive them from the district, which they did in short order. When some of the rebels were arrested and put into prison, an auctioneer named John Fries led a march on the courthouse and freed them. President John Adams once again called out the militia. Fries was captured, tried, and convicted of treason, but later received a presidential pardon.
By the time Thomas Jefferson became President, the nation had already experienced two uprisings over taxes – small to be sure, but revolts nonetheless. Hamilton and Adams had wanted to forge ahead with a powerful central government, and for this they needed revenue. The political tide now turned back to Jefferson’s views of limited government. In his first Annual Message, Jefferson urged repeal of all internal taxation and a return to a reliance on tariffs alone. He said:
Considering the general tendency to multiply offices and dependencies and to increase expense to the ultimate term of burden which the citizen can bear, it behooves us to avail ourselves of every occasion which presents itself for taking off the surcharge; that it may never be seen here that, after leaving to labor the smallest portion of its earning on which it can subsist, government shall itself consume the whole residue of what it was instituted to guard.
Jefferson was not just making a speech to please the voters. He followed through. He cut government spending to the bone and even put much of the Navy into drydock. Meanwhile, Treasury receipts from tariffs were growing rapidly with the expanding nation. Lower taxes left the consumer with more money to buy imported goods. Jefferson proved his point. At the end of his term, the government actually had a surplus and had accelerated repayment of the federal debt – all as a result of tariffs alone.
The second time a direct tax was levied in accordance with the apportionment requirements of the Constitution was in 1813, principally to pay for the War of 1812. Another direct tax was assessed two years later for the same purpose. The first was for $3 million and the second for $6 million. The terms of assessment and proportion among the states were similar to those of the first revenue act. One interesting variation, however, was that the states were given the option of levying the tax entirely on their own according to whatever method of distribution they wished, saving the federal government the expense of administering the project. The states could take a 15 percent discount if they paid within six months, and a ten percent discount if they paid within nine months.
The first part of the 19th century was a period of great growth and prosperity for the United States. Excise taxes had been repealed, and the debts of war had been repaid. By and large, the central government was weak regarding internal affairs, which meant that the people were strong. The bureaucracy stayed out of the way and let Americans get on with their lives. Commerce flourished, wealth was created, and the standard of living for the common man soared. The Old World watched in amazement and envy. Then, with the War Between the States, the long retreat from greatness began.
With the outbreak of war between the northern and southern states, there was urgent need on both sides for massive armies and equally massive funding. In the South, almost the entire amount was raised by fiat money – paper bills with no backing in gold or anything of tangible value. In the North, however, Congress struggled to raise revenue in accordance with the Constitution. War was exactly the kind of “exigency” foreseen by the Founding Fathers when they established the principle of apportionment. So on August 5, 1861, Congress enacted the nation’s fourth direct-tax revenue bill for the stated amount of $20 million. It was similar to the previous bills except that this time slaves were no longer taxed as property – only land, “improvements,” and dwellings. The big departure, however, was that it also contained a provision to tax incomes. Congress did not like the idea of having to get taxes on a piecemeal basis. It wanted a continual flow of income without having to justify its specific purpose and without stated amounts. It looked for a way to bypass the apportionment process.
But how? All direct taxes had to be apportioned. That is what the Constitution mandated. The solution was easy: Since an excise tax is an indirect tax and does not have to be apportioned, they simply redefined the income tax as an excise tax.
The “excise” tax was a flat three percent of all income over $800 a year. Considering that the per capita income at that time was only about $150, that was a substantial exemption. Putting aside the merits or demerits of an income tax in general, we are dealing here with the concept of exemptions from that tax. This is, once again, the feudal tradition of noblesse oblige, but under a slightly different form. It is directly contrary to the concept of taxation with representation. If some are exempt from the tax, for whatever reason, and if they continue to have representation, then those who do pay it are denied an increment of consent and representation which is in direct proportion to the exemption.
In retrospect, the war-emergency income tax proved to be a relatively unimportant source of revenue. By far the greater part came from government debt and fiat money, which, incidentally, also was contrary to clear provisions of the Constitution. The Lincoln Administration raised a total of about $2.7 billion in bonds and “greenbacks.” The direct tax on property pulled in about $17 million. The income tax, over the ten-year period it remained in force, raised about $347 million. Wars are seldom financed out of tax revenue alone. Inevitably, they are funded by government debt, the monetization of which causes inflation – a form of taxation few people understand. Americans in the northern states paid, in addition to the property tax, a hidden tax of a full one-half of all their savings as a result of a 50 percent decline in the purchasing power of their money during that period.
America’s first income tax was sold to the citizens as a temporary necessity, a wartime emergency. As such, it contained a date for its own termination. As is often the case in such matters, Congress managed to extend it a few years longer, but it finally did expire in 1872. By this time, however, the theories of Karl Marx were sweeping through the intellectual and educational institutions of America, and the populists were capturing political power. Politicians dreamed longingly of a permanent income tax because of the bountiful stream of revenue that would flow from it. But the masses also were fascinated with the progressive – or “graduated” – feature because it gave expression to their envy of the rich and salved their sense of hurt over high protective tariffs. Senator William Peffer of Kansas expressed this prevailing mood:
Wealth is accumulated in New York, and not because those men are more industrious than we are, not because they are wiser and better, but because they trade, because they buy and sell, because they deal in usury, because they reap in what they have never earned, because they take in and live off what other men earn…. The West and the South have made you people rich.
High Court Spike
With pressure from both the public and the politicians for a progressive income tax, who could stand in the way? But five men did do exactly that. They were Justices of the Supreme Court.
In 1893, President Grover Cleveland jumped on the populist bandwagon, asking Congress to lower tariffs and make up for lost revenue by taxing the income of corporations. The bill was expanded to include personal incomes as well and passed through Congress the following year. Before it even went into effect, however, it was declared unconstitutional by the Supreme Court. In the case of Pollack v. Farmer’s Loan and Trust Co., the High Court declared that a tax is not lawful if it is levied on income from investments, because that would be the same as a tax on property. As such, it is a direct tax, which according to the Constitution must be levied in accordance with the rule of apportionment.
At the time of this ruling, the populists were in firm control of the Democratic Party and were making inroads into the Republican ranks as well. They castigated the Supreme Court as a tool of the rich and an enemy of the people. President Theodore Roosevelt advocated a progressive inheritance tax in 1906, and in his 1908 message to Congress called for a new income tax, suggesting that it be worded in such a way as to prevent the Supreme Court from striking it down. When William Howard Taft became President, the political winds were at gale force. It was no longer a question of if an income tax was to become law, only of how.
In April 1909, Senator Joseph Bailey, a wealthy Democrat from the South, introduced an income tax bill that he expected to be opposed by the Republicans. But the Republicans decided to steal the show by introducing a plan of their own. Under the leadership of Senator Nelson Aldrich of Rhode Island, and with the help of President Taft himself, they proposed an amendment to the Constitution as a means of circumventing the Supreme Court. It is sometimes claimed that these men were secretly opposed to an income tax and resorted to this stratagem merely to appease populist sentiment, while hoping that the amendment would never be ratified by three-fourths of the states. There is ample reason, however, to believe that they proposed the amendment because they truly wanted it.
Aldrich, in particular, is highly suspect in this role. His daughter, Abbey, was married to John D. Rockefeller Jr., and Aldrich was the man who arranged the secret meeting on Jekyll Island in Georgia in November 1910 that led to the creation of the Federal Reserve System. He also played a pivotal role in making sure that the income tax law did not apply to foundations. This made it possible to shift the tax burden to the middle class by allowing tax-exempt status to the great fortunes of such families as Rockefeller, Morgan, Carnegie, and Aldrich.
A Modern Serfdom
At the very least, it must be concluded that these men, sensing the unstoppable clamor for a soak-the-rich income tax, decided to run to the head of the parade, lead it away from Wall Street, and render the law harmless to themselves and their friends. It is not paranoia, however, to sense that there was more to it than that. It is quite possible that they represented a cabal of monetary and political scientists that planned the entire scenario and even helped create the public clamor that would serve as an excuse for their action. Their objective, in this more sinister view, would have been the creation of a modern serfdom with themselves as lords and masters. The serfs would be convinced of their self-importance by the delusions of representative government and the socialist tax that they honestly believed was to their benefit. The age-old dream of contented serfs would at last be realized.
The Senate approved the 16th Amendment by an astounding vote of 77 to zero! The House followed suit with a roll call of 318 to 14. The measure then went to the states for ratification. On February 12, 1913, the 42nd state voted for approval, and the following words became a part of the United States Constitution:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Casting the Die
The 16th Amendment was sold to the people with solemn assurance that the income tax would be simple to compute, fair to all, and would never apply to any part of a person’s income needed to sustain a decent standard of living. It was generally understood that only very large incomes derived from investments would be taxed, not the wages of the working man. That was, of course, a farce. The very first federal tax form issued in 1913 listed wages and salaries as income on which tax was to be paid.
The first tax was delicate by today’s standards. After a whopping exemption on the first $4,000 of family income, the government took only one percent of the first $20,000, two percent at $50,000, and the highest rate was seven percent on incomes in excess of $500,000. These were all astronomical incomes in 1913, so it was only the very wealthy who paid any tax at all.
But the die was cast. Now that the federal government had a direct and perpetual access to the wealth of its citizens and no longer had to justify its financial needs through specific revenue acts, its spending began to rise like a hot-air balloon. With each round of spending came a reduction in the amount of exemptions, an increase in the tax rate, and a compounding of the complexity. At first it was the incomes of corporations; then of the very wealthy; then of the well-provided widow and the highly paid worker; and finally the wages of the janitor and the tips of waitresses.
No one in America fully understands the constantly changing Internal Revenue Code. Agents of the IRS do not, judges do not, congressmen do not, and most assuredly taxpayers do not.
When one considers the complexity of the tax code and the astronomical expense of operating the IRS itself, it is obvious that every other tax that has ever been tried in history is easier to compute and more efficient to collect than the income tax. And every time there is a tax “reform” bill rushed through Congress, the tax code always seems to emerge more complex and unfair than before. It is the nature of the beast.
The result of this reality is aptly described in the beginning of Prentice Hall’s booklet, Research in Federal Taxation. Under the heading, “Opportunities Unlimited,” it says:
Today’s tax professionals face the prospect of the most promising future in the history of their profession…. With each passing year the federal tax laws affect American business and the individual taxpayer more and more. No businessperson, however expert in the business practices, can do without a tax advisor. He or she needs help on business transactions that have tax implications, because many daily business decisions are regulated to a degree by the tax consequences and results. And the great majority of taxpayers are becoming increasingly aware of the impact of the federal tax on their income and personal wealth. Their investments, provisions for retirement, wills, and business-connected (or sometimes even personal) expenditures require tax planning.
America has become infested with a swarm of tax professionals who are a drain on every business and private transaction that occurs. A significant part of everything we purchase goes to pay for a vast workforce of bookkeepers and accountants who must maintain reams of records to substantiate every cost of doing business, while producing nothing to expand the physical or cultural well-being of the nation.
Retarding the Economy
In the long run, any income tax, even one that is based on the same percentage for everyone, will serve to lessen the incentive to produce and, thus, will retard the nation’s economic growth – which, in turn, will lower everyone’s standard of living. One of the most powerful advocates of this idea in 1879 was Henry George, better known for his advocacy of a single tax on land. We do not have to agree with his thesis on the single tax to appreciate the wisdom of his opposition to a direct tax on income or personal property. In his treatise Progress and Poverty, George wrote:
If I have worked harder and built myself a good house while you have been contented to live in a hovel, the taxgatherer now comes annually to make me pay a penalty for my energy and industry by taxing me more than you. If I have saved while you wasted, I am [milked] while you are exempt.
If a man built a ship, we make him pay for his temerity as though he had done an injury to the state; if a railroad be opened, down comes the tax collector upon it as though it were a public nuisance…. We punish with a tax the man who covers barren fields with ripening grain; we fine him who puts up machinery and him who drains a swamp.
To abolish these taxes would be to lift the whole enormous weight of taxation from productive industry…. The state would say to the producer, “Be as industrious, as thrifty, as enterprising as you choose. You shall have your full reward!”
Since the income tax was created in 1913, it has been a long, bumpy ride and the American people have been jarred into a state of annoyance. We no longer are misty-eyed over political rhetoric that promises a utopia to be paid for by someone else. We have learned the hard way that there is no free lunch. Our “lunch,” in fact, has cost us a fortune.
It has been necessary to review some history and taxation theory in order to come to an understanding of how we got to where we are and, most important, to learn from the mistakes of the past. Hopefully the information presented here will help crystalize the thinking of those who are opinion leaders. But specific proposals must be constructed in such a way as to have broad, immediate appeal to the American public. With that objective in mind, let us turn, finally, to what now must be done to restore tax sanity to our government.
Presidential candidate Steve Forbes made his “flat-tax” plan a major campaign issue. A flat-rate income tax is certainly an improvement over a graduated income tax. But if a flat-rate tax were adopted, it still would be a direct tax and would still allow Congress to have continual access to our pocketbooks without ever having to explain or justify why it needed the money. Tax reform will never become a reality until Congress is once again required to live within a modest means – as would automatically happen if it had to depend only on indirect taxes – or, if extraordinary revenue is wanted, to specify the exact amount and to justify it in a specific revenue act.
Eliminate the Income Tax
The flat-tax plan is not the answer. What we need is to follow the greatest proposal for tax reform the world has ever seen, and it is already in our Constitution. What we need is to take the chains off the rule of apportionment and put them back where they belong, on the Congress of the United States. What we need is to repeal the 16th Amendment.
This single act would accomplish almost everything the current proposals for tax reform claim to seek. For the first time since 1913, the federal government would have to prepare a realistic budget, because it would no longer be able to rely on an ongoing, limitless supply of revenue. Like the rest of us, it would have to live within its means, which would be from indirect taxes only. If it exceeded this budget, it would have to face the voters with a specific request for a specific amount on a specific date. It is difficult to conceive of a more effective plan for trimming the scope and reach of the federal bureaucracy. It would be necessary to scrutinize the budget to try to discover the hidden boondoggles and subsidies. Cut back the funds, and these automatically would wither away. The rule of apportionment is the only realistic answer.
Yes, we are talking about the elimination of the income tax. Many people would naturally ask, “But where would the money come from to run the government?” This question presupposes that all the money the federal government now receives is necessary. The reality is that – if we were to cut out the waste, subsidies, foreign giveaways, transfer programs, interest on the national debt, transfusions into the International Monetary Fund, and support for the World Bank, plus the cost of running the IRS itself – the federal government could easily operate, as it was intended to do, on indirect taxes alone. Many important sources of revenue would not be affected by apportionment, most specifically tariffs (for revenue only, not for subsidizing a politically favored industry) and such excises as a gasoline tax for the maintenance of roads, fees for admission to national parks, postage stamps for the operation of the post office, and similar items. It is totally workable.
THE TRUTH ABOUT MONEY and why we must get out of the UN
For those of you who really want to know the TRUTH:
The original Mint Act, was passed on Thursday, January 12, 1792. This Act was drafted in Pursuance of the Constitution for the United States of America [See: Article VI, Clause 2] and provided for the minting of both gold and silver dollars under Section 9. This Act met all of the requirements of Article I, Section 8, Clause 5 and 6, and Article I, Section 10, Clause I. The issue of the United States being empowered to “emit bills of credit” was discussed in the Constitutional Convention on Thursday, August 6, 1787. The power and authority was denied to the general government upon good and sufficient grounds. It would take all of 75 years to subvert what the Constitution was designed to prevent and more: the erosion of confidence between man and man.
The issuance of paper as a “legal tender” and circulating medium of exchange did not occur until 1862 during the Civil War. The Congress authorized the emission of non-interest bearing Treasury notes and declared the bills of credit to be legal tender for all debts, public and private, with the exception of taxes on imports. The notes were deemed necessary to “float the debt of the United States” for the war effort. In short, the paper “green backs” were “printed” under pretext of “war powers”.
On June 3, 1864, Congress passed “An Act to provide a National Currency, secured by a Pledge of United States Bonds, and to provide for the Circulation and Redemption thereof.” This Act recreated the central banking system as a “National Association” which later evolved into the Federal Reserve Banks. All private bank notes issued under authority of the Act were “issued and circulated the same as money”, had to be redeemable at “par value” (one-for-one) with the Coin, and were declared to be tender for the payment of all debts public and private under Section 23. “Pledging or hypothecating” any of the notes in circulation under this Act was prohibited under Section 37.
By 1908, the United States had accumulated a large deficit. Discussions had begun to surface concerning amendments to the Constitution regarding revenue and taxation. In 1909, Congress and the President passed the Corporate Tax Act of 1909 while knowing that the activity has previously been declared to be unconstitutional in Pollock vs. Farmers Loan And Trust Co., 187 U.S. 429 (1895). The Sixteenth Amendment was proposed by Congress on July 12, 1909. The Amendment was certified to be a part of the Constitution on February 25, 1913. The Constitutional impediment concerning State intervention in direct taxation has been removed, however it did not expand the taxing power of Congress beyond the limitations set forth in Article I, Section 8, Clause 1, and Article I, Section 9, Clause 4.
On December 23, 1913, Congress passed “An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford a means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes”. The Act is commonly known as the “Federal Reserve Act”. Some of the purposes for enacting the Federal Reserve Act were to:
(1) collect 94% of the “net earnings” of the Federal Reserve Banks under pretense of a “Franchise Tax” under Section 7;
(2) legalize and extend a “float” on the debts by reducing the backing or reserve requirements to 40% of the notes in circulation and transactions accounts under Section 11;
(3) authorize “hypothecation” of obligations including “United States bonds or other securities which Federal reserve Banks are authorized to hold” under Section 14(a); and,
(4) “establish branches in foreign countries or dependencies of the United States for the furtherance of the foreign commerce of the United States” under Section 25.
It is important to understand the term “hypothecation” as stated in Section 14(a) of the Act.
1. Banking. Offer of stocks, bonds, or other assets owned by a party other than the borrower as collateral for a loan, without transferring title. If the borrower turns the property over to the lender who holds it for safekeeping, the action is referred to as a pledge. If the borrower retains possession, but gives the lender toe right to sell the property in event of default, it is a true hypothecation.
2. Securities. The pledging of negotiable securities to collateralize a broker’s margin loan. Of the broker pledges the same securities to a bank as collateral for a broker’s loan, the process is referred to as rehypothecation.”
[Dictionary Of Banking Terms, Fitch, pg. 228 (1997)]
Section 16 of the Federal Reserve Act, which is codified at 12 USC 411, declares that “Federal Reserve Notes” are “obligations of the United States”. The “full faith and credit” of the United States was thereby hypothecated and rehypothecated to the lending institutions for the issuance and emission of bills of credit as legal tender “for all taxes, customs, and other public dues”. The paper in circulation and transactions accounts could then be inflated 60% and the purchasing power depreciated and reduced by an equivalent amount.
On June 17, 1917, Congress amended the Federal Reserve Act of 1913. Section 6 of the Act broadened the capacity of the Federal Reserve Banks to engage in foreign commercial transactions and joint ventures in foreign countries. Section 7 reduced the reserve requirements on transaction accounts and circulating currency to 35%. The authorized float and expansion of credit, by another 5%, created a reciprocal rise in the price of goods and services, and a depreciation in the purchasing value of the circulating medium of exchange. The cumulative total inflation and depreciation was now 65%.
The indiscreet extensions of hypothecated and rehypothecated credit, speculative investments, and issuance of fractional reserve paper enervated trade and caused the economic collapse known as the Great Depression. Under the Federal Reserve fractional reserve system about 600 banks per year failed from 1920 through 1929. The number of bank failures escalated to 1,345 in 1930, and to 2,298 in 1931. The number dropped to 1,453 in 1932, but skyrocketed to 4,000 in 1933. It is necessary to remember that the fractional reserve system paper was on a “float”, however, the dollar was still made of gold and silver, and both the “Federal Reserve notes” and the “Treasury notes” clearly stated on their face that they were redeemable at par value upon presentment and demand.
Today, “Federal Reserve notes” are officially recognized as “SDR’s” — Special Drawing Rights under the amended Bretton Wood Agreements Act, Public Law 94-564. [See: Legislative History, Senate Report No. 94-1148, October 1, 1976] Quoting from the Legislative History, to wit:
“The dissolution of the monetary system created by the Bretton Woods Agreements can be traced to the early 1960’s. The monetary system during this time made a de facto transition from a “gold standard” to a dollar standard . . . There were more dollars abroad than the U.S. had gold. The U.S. commitment to redeem international dollars for gold became a physical impossibility. The reality of dollar convertibility ended.”
From the foregoing it can be seen that a “De Facto Transition” had occurred. In other words, de facto government operating under and according to the rule of necessity – no law.
Preceding the de facto transition, a number of other things had occurred. Pursuant to 22 USC 286, the President was authorized to accept membership for the United States in the International Monetary Fund (“The Fund”), and in the International Bank For Reconstruction and Development (“The Bank”), provided for by the “Articles of Agreement of the Fund” and the “Articles of Agreement of the Bank”, as set forth in the “Final Act of the United Nations Monetary and Financial Conference” dated July 22, 1944, which are deposited in the archives of the Department of State. These Acts are commonly known as the Bretton Woods Agreements. They are international agreements. The Articles of Agreement assert that those holding public office could do not only what the delegated powers under the Constitution did not authorize, but what they forbid. In other words, Congress created these two entities and granted them the capacity to do what they were prohibited from doing directly. The complete debasement of the Constitutional Coin was effected and accomplished under the International Monetary Fund’s (IMF) Articles of Agreement.
Pursuant to 22 USC 286a, the President appoints the alien, corporate “Governor” to oversee the United States membership in “The Fund” and “The Bank”. He is today commonly referred to as the “Secretary of Treasury.” The Office of Secretary of Treasury was formerly, that is, prior to May 20, 1920, a cabinet level position in the Executive Branch. That is not now the case because the “Treasury” was abolished in 1920-21. This occurred following the unconstitutional and unlawful redelegation of authorized powers of Congress under the Federal Reserve Act in 1913, out of which there was created an “independent treasury” on May 20, 1920, in which the People’s money was commingled. Thereafter the gold was systematically, and criminally, removed and transferred out of the country, eventually causing a “run” on the banks, and ultimately, the Emergency Banking Relief Act of March 9, 1933, 48 Stat. 1. War and Emergency Powers had worked in 1862, and again in 1933, to expand unauthorized power beyond Constitutional and statutory limitations and prohibitions. Like the economic emergency itself, the emergency executive power is still active and available to further the “systematic scheme”.
On March 18, 1968, Congress passed “An Act to Eliminate the reserve requirements for Federal Reserve Notes and for United States Notes and Treasury Notes of 1890”, Public Law 90-269, 82 Stat. 50. This Act was designed to remove the remaining reserve requirements on circulating notes and obligations. $1.3 billion in gold was “pledged” against “gold certificates” and held as reserves against circulating notes and obligations. Under this Act the gold certificates would be withdrawn and retired, then the gold would be considered as “free gold” and paid out to foreign interests at $35 per ounce. The monetary reserves of gold and gold certificates would be supplemented and then replaced “by the mechanism of special drawing rights (SDR’s) within the framework of the IMF” [See: House Report 1095, pg. 1763] It was also known, at that time, that the continued expansion of circulating Federal Reserve Notes would use up the “free gold” in two years, however, the “new standards of international reserves and exchange” was right around the corner [See: House Report 1095, pg. 1780] The Federal Reserve Note, thereafter, met all of the qualifications of a worthless security under 26 I.R.C. 165(g). The action of disavowing and repudiating obligations in 1968, like those that occurred in 1933 and 1934, were given effect and compulsion. The system had become nothing more nor less than a “confidence game” devised to psychologically dupe the public who were left generally ignorant of the activities and known affects.
On June 19, 1968, only three months later, Congress passed the “Special Drawing Rights Act”, Public Law 90-349, 82 Stat. 188. This Act amended the Gold Reserve Act of 1934. Under Section 2 of the Special Drawing Rights Act, the SDR’s are “administered as part of the Exchange Stabilization Fund established by section 10 of the Gold Reserve Act of 1934, as amended (31 USC 822a).” The operations of the Exchange Stabilization Fund and now the SDR’s are under the “exclusive control of the Secretary of Treasury” and “are not reviewable by any other officer of the United States”. Anything in the ESF remains in the Fund, for the use of the Fund. This new program is subject to the Articles of Agreement of the IMF in accordance with Section 3 of the SDR Act of 1968. Of course, the “Secretary of Treasury” is, in reality, the “Governor” of the IMF, and is not an officer of the United States. [See: Public Law 94-564, 90 Stat. 2660, Senate Report 94-1148, pg. 5942; 22 USC 286a]
Section 4 of the Special Drawing Rights Act sets forth the general protocols. The “Secretary of Treasury” [Governor-IMF] issues an international letter of credit called a “Special Drawing Rights Certificate” to the Federal Reserve Banks “in such form and in such denomination as he may determine”. The SDR is deposited in the Federal Reserve Banks which in turn credits the account of the Exchange Stabilization Fund (ESF) with Federal Reserve Notes in an amount equal to the value of the SDR certificate. SDR’s became the “collateral security for Federal Reserve Notes”. The term “dollar” was thereafter valued in direct and inseparable proportion to Special Drawing Rights, not to “dollars”, gold and silver Coin. The “dollar” became mere “book entries in special accounts of the International Monetary Fund” under the United Nations. [See: Senate Report 1164, pg. 2105] In effect, the International Agreements had taken precedent over domestic limitations and obligations pursuant to the authority delegated by “We the People” in the ordained and established Constitution for the United States of America. The international organizations had gained economic control of the domestic monetary system, and would now make political decisions for the members. In common parlance, the Nation has been economically “overthrown” and bankrupted. Under “rule of instrumentality” the “United States” exists in pretense of name only, being the altered of the true principal and parties of interest, The Fund and The Bank. With the enactment by Congress of Public Law 95-147 on October 28, 1977, all financial institutions, banks and credit unions alike, were placed on the exclusive direction and control of the “Governor” of “The Fund” and “The Bank”, i.e., the United Nations, which is the World Communist Movement. A foreign power now roosts and rules exclusively over each and every American. Recall that the operations of the Exchange Stabilization Fund and now the SDR’s are under the “exclusive control of the Secretary of Treasury” and “are not reviewable by any other officer of the United States”.
Me thinks your chicken is cooked unless this foreign entanglement and power is thrown off of our body politic.
May I interest you in a “home equity loan” from your “local” banker? How about a 30 year MORTgage? Or, a checking account to keep track of your SDR’s? These banks with names like “KEY”, “WELLS FARGO”, “SEATTLE-FIRST”, “WASHINGTON MUTUAL SAVINGS BANK” — they just don’t seem to be what they appear . . . do they?
Would you like to have some real money? Go look up 31 USC 5112 and the current pocket part, and then go talk with your local Coin shop dealer. You’ll want to trade the worthless paper for American Gold Eagles and American Silver Eagles that have intrinsic as well as numismatic value and are a legal tender at their “buying sight rate” of exchange on the day of tender. You can thank the very Honorable Philip M. Crane of Illinois, who gave you the “American Gold Eagle Coin Act of 1985” [Public Law 99-185], and the “Liberty Coin Act” of the same year [Public Law 99-61] that you have the opportunity to now own real money.
Now you should have some idea what a dollar isn’t: Federal Reserve Notes are not “dollars”. Now you know “why” it is necessary that the U.S.A. get out of the United Nations!
Permission to repost granted with full disclosure/credits.
All laws which are repugnant to the Constitution are null and void.