Lyle Denniston examines how a move by the acting head of Social Security that ended a tax return withholding practice has constitutional implications.
Many Americans, not just the courts, help shape the meaning of the Constitution in the nation’s life. This series explains the actual or potential contributions of these other individuals, groups or institutions. Today’s Constitution-maker is the acting commissioner of the government’s Social Security Administration, Carolyn W. Colvin. On Monday, she announced that her agency was stopping immediately a practice of withholding tax refunds from individuals in order to recover debts owed to the government by other members of their families who supposedly had been paid too much in benefits, if the debts were ten years old or older. It was a decision that could alter, in a basic way, the ties between citizens and their government. The Washington Post also was a Constitution-maker in this episode, since its investigative reporting had ferreted out the practice that has at least been put on hold while officials decide what to do next.
It was perhaps a fine example of civic justice that, on the week that Americans were supposed to fulfill their duty to pay their taxes to the federal government, the government decided that it had pushed its financial powers too far, at least for some citizens. There is no more fundamental – or more necessary – aspect of constitutional arrangements than the government’s dependence upon citizens’ paying their taxes. But the system, to work, has to be fair, and has to be seen as fair.
Alexander Hamilton, who recognized more clearly than any of the other Founders that a lack of dependable revenue made it next to impossible for a government to function properly, spelled out that stark reality in Federalist Paper No. 30.
He wrote (anonymously, at the time): “A complete power to procure a regular and adequate supply of revenue, as far as the resources of the community will permit, may be regarded as an indispensable ingredient in every constitution. From a deficiency in this particular, one of two evils must ensue: either the people must be subjected to continued plunder, as a substitute for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in a short course of time, perish.”
Europe, the Founders knew, was constantly beset with governmental crises because of “plunder” by kings of their people’s resources, to pay for the lavish living of the royals.
Historians are convinced that the pre-constitutional Articles of Confederation government in America was doomed, in considerable part because it could only beg the several states for money, and that waging the Revolutionary War was almost a lot cause for want of money to buy everything from guns to shoes for the troops.
Thus, there may be no more essential part of the Constitution written in 1787 than the provision in Article I giving Congress the power “to lay and collect taxes…and provide for the common defense and general welfare of the United States.” But, even at that early stage in the nation’s development, the Founders wanted to be sure to add an element of fairness to this mandate. Section 8 goes on to require that all assessments on the people “shall be uniform throughout the United States.” Translated, that meant that New Yorkers could not be required to pay more taxes than Virginians.
Congress, from the beginning, had experimented with taxes on income, but the version adopted in 1894 was struck down by the Supreme Court in 1895, in the case of Pollock v. Farmers’ Loan & Trust Co. Because this tax fell on individuals differently because of differing assets, the court ruled that it was not properly spread among the people of the states.
The government then had real trouble paying for itself without the income tax, and turned uncertainly to taxes on liquor and to revenue from tariffs on imports.
The power to impose a tax on income was restored in 1913 with the ratification of the 16th Amendment, giving Congress the power to tax incomes on individuals, without spreading the burden evenly among the states. Such taxes, the Amendment said, may be levied on income “from whatever source derived.
Few Americans, perhaps, realize that the nation could only afford the moral and cultural experiment of outlawing liquor under the 18th Amendment because Congress had the income tax, and need no longer rely upon liquor tax revenues.
Although the federal government now, as always before, stands ready to crack down hard on an individual or a company that fails to pay the taxes that are due, the nation remains in an ongoing debate over whether the tax system is fair, and especially whether the tax system contributes to making the rich richer and the poor poorer.
At a very personal level, though, there are many Americans, especially among those living on more modest incomes, who probably have less interest in the national debate on fiscal policy that they do on their eligibility for tax refunds, when they have paid too much.
The Washington Post, though, recently discovered that the federal government was “seizing state and federal tax refunds that were on their way to about 400,000 Americans who had relatives who owed money to the Social Security agency. In many cases, the people whose refunds were intercepted had never heard of any debt, and the debts dated as far back as the middle of the past century.” During the current year alone, The Post reported, the government collected some $5 million as an offset to debts that had been delinquent for more than 10 years.
After an uproar in Congress, and presumably under pressure from The Post’s revelations, the acting head of Social Security, Carolyn Colvin, put at least a temporary stop to trying to recover for the older debts that are outstanding. In doing so, Commission Colvin did her part in maintaining the long constitutional tradition of making fairness a tax policy.
Lyle Denniston is the National Constitution Center’s adviser on constitutional literacy. He has reported on the Supreme Court for 55 years, currently covering it for SCOTUSblog, an online clearinghouse of information about the Supreme Court’s work.