Property Taxes and Taxing You on Unrealized Gains

August 28, 2024 by Martin Armstrong

COMMENT: Hello Martin,

they already “tax” the paper increase in property taxes. My tax bill went up 70% in the last two years. All I enjoy is an increases mortgage statement.

I decided to fight it this time and from now on every year. After having looked into how they do come up with new assessments I am mad as hell.

Thank you for the very educational daily posts.

DS

REPLY: You are absolutely correct. This is the lifeblood of state and local governments. It is true that in ancient times, there were taxes based on ownership of property, not income. Our property taxes today, just like Civil Asset Forfeiture laws, have their roots in religious ideas and then feudal obligations owned by British and European kings or landlords.

In America, taxation only became possible when there was a recognizable monetary system.  From 1643 to 1660, wampum — the shells prized by local Native American tribes — were legal tender in Massachusetts. Throughout the 17th century, in Virginia and North Carolina they used tobacco leaves as commodity money. This lack of a formal monetary system in America promoted the development of colonies by facilitating trade. The British did not approve of these commodity-based monetary systems and ended the practice in 1660.

Civil Asset Forfeiture

The United States Supreme Court in J. W. Goldsmith Jr., Grant Co. v. The United States, 254 U.S. 505 (1922), noted the origins of government forfeiture power in the historical practice of Deodand. The court cited Sir William Blackstone (1723–1780), in his “Commentaries of the Laws of England”, which noted that this practice extended back to the times of Ancient Greece. A Deodand is a thing forfeited or given to God, specifically, in law, an object or instrument that becomes forfeited because it has caused a person’s death.

The English common law of Deodands traces back to the 11th century and was applied, on and off, until Parliament finally abolished it in 1846. Deodand is not practiced in the United States or Canada, yet it has been transformed into the government’s right to seize your property even if you have done NOTHING wrong, for it is the object that commits the offense, not you. Politicians have assumed the role of God, and it is no longer a justification that says you had a horse that suddenly was spooked and took off running and killed someone. The horse was then forfeited to really help pay for the funeral costs of the victim. This has been transformed into civil asset forfeiture.

Property Taxes

In the 14th and 15th centuries, British tax assessors used ownership or occupancy of property to estimate a taxpayer’s ability to pay. With the passage of time, this “occupancy” tax came to be regarded as a tax on the property itself. With this, the tax was justified under this theory of In Rem, which was the same idea under Deodands: the property was some sort of living person. In the United Kingdom, the tax system is developed into a system called “rates” based on the annual (rental) value of property. You rent an office, and the “rate” can be as much as the rental value of the property in the financial sector of the City of London.

In 1670, a levy of one-half penny per acre of land was imposed for the support of the colonial government of New Jersey – the colony named after Julius Caesar (Nova Caesaria). In 1682, the establishment of counties led to the property tax becoming the primary source of funding for local government. Then, in 1686, townships in New Jersey were given permission to raise revenues for public improvements. Until the middle of the 19th Century, property taxes were levied on real estate and certain personal property at arbitrary rates within certain limits, referred to as “certainties.” Perhaps that may have been the inspiration for Ben Franklin to say the only two certainties in life are death and taxes.

The British government expected its American colonies to fund their own administrative governments and participate in defending the empire, including the French-Indian Wars. How each colony accomplished these feats was largely left up to them. Paper money was printed to fund various projects. It was an early form of monetization. Here is an issue of Pennsylvania for constructing a lighthouse that displays a picture of the lighthouse on the reverse side of the notes. The Quakers created the first prison, and the word “Penitentiary” was used because you were sent there to do penance in solitary confinement.

The growth of the property tax in America was greatly influenced by this theory of taxing the rich, which began with local government, and this idea of fairness based on class, which gave way to equal taxation of wealth, which was justified by the development of equalitarian ideology, as governments needed to justify taxation.

Property Taxes in Colonial America began with two taxes that altered how people lived. There was the Window Tax that inspired row homes in Colonial America. They imposed a tax on every window you had for the more windows you were disgustingly wealthy. That tax simply became the standard, which was why row homes became the norm in the oldest cities, as illustrated here in Philadelphia. Row Homes eliminated the need for windows on two sides of the house and thus lowered the taxes.

Politicians, realizing that Row Homes was defeating their REVENUE collection, imposed a new tax on steps. You will also see some colonial houses had just one step and others two or three. You were then taxed on the number of steps you had. Hence, the saying “taking a step up in life” had its root in the fact that you were rich because you had more than one step and were taxed at a higher rate.

Taxes have always altered behavior. The higher the taxes in a city, the more people moved to the suburbs in ancient times as they do today. When the Revolutionary War began, the colonies had well-developed tax systems that made war against the British Superpower of the day even thinkable. The tax system varied from colony to colony by this time. There evolved a variety of taxes that went beyond property. Tariffs were levied on goods imported or exported, and Excise Taxes were levied on consumption goods, especially liquor and, of course, English Tea (i.e. Boston Tea Party). Capitation or Poll Taxes were also levied at a fixed rate on all adult males and sometimes on slaves. Property Taxes had expanded into what you might call tariffs on specific enumerated items beyond windows and steps. Faculty Taxes were levied on the faculty or earning capacity of persons following specific trades or having certain skills.

During the war, colonial tax rates increased by at least 700%, taxation became a matter of heated debate, and some led to violent protests. Settlers far from markets complained that taxing land on a per-acre basis was unfair and demanded that property taxation be based on value since all land was not equally productive. In the Southern Colonies, they tended to rely more on the poll tax than on the value of property. In some cases, changes in the tax system caused the wealthy to complain. In New York, they created the Excess Profits Tax, which had been levied on war profits. This is what Kamala is claiming to do to food. New Jersey came up with a tax on intangible personal property as well that was imposed on an arbitrary basis. This intangible property tax, in addition to real estate, was finally abandoned in New Jersey only in 1945. Some states, like Virginia, impose a sales tax when you buy a car and then subject you to an annual property tax on the car based on where you park it.

By the end of the American Revolution, the concept of “equality” articulated in Thomas Jefferson’s draft of the Declaration of Independence was being twisted from political rights to taxation on wealth.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

Many began pondering the meaning of “equality,” and the self-interest of those in government justified their greed for more and more revenue, arguing that the term had implications for taxation as well. Governments looked upon the people as economic slaves and often saw little distinction between political equality and the tax system. Governments were adopting discrimination based on class and wealth, which was perhaps the philosophy emerging in the French Revolution, cutting off the heads of the rich. They even went as far as to confiscate the property of the Catholic Church. Unsurprisingly, the idea of communism emerged from the French Commune Movement that surfaced in 1871.

Constitutionalizing Class Warfare in the Nineteenth Century

To a large extent, Adam Smith’s Wealth of Nations (1723-1790), published in 1776, articulates an important view of the economics of government. In 1796, seven of the fifteen states levied uniform Capitation/Poll Taxes. Twelve states imposed taxes on some or all livestock, taking the idea of all property. Land or Property Taxes were applied in various ways, yet only four states taxed the property by valuation. Looking closely, we see that no state’s Constitution requires taxation to be imposed by value. There is also no evidence that all kinds of property tax rates are uniform.

The very year Karl Marx (1818-1883) was born, Illinois finally adopted the first uniformity clause. This trend began as Missouri followed in 1820, and Tennessee in 1834 required that land be taxed at a uniform amount per acre with a provision that land be taxed according to its value (ad valorem). By the end of the 19th century, 33 states had included uniformity clauses requiring that all property be taxed equally by value, which is where we are today.

The ancient Roman governor of a province could become very rich. The province would pay taxes to Rome, but it was left to the discretion of the governor what and how to tax giving rise to the term Tax Farmer. There were two classes of taxes: the tributa, which included the tributum soli (a land tax), and the tributum capitis (a poll tax). The second form of taxation was the vectigalia which consisted of four kinds of tax: the portoria (poll tax), the vicesima hereditatium (inheritance tax), the vicesima liberatis (postage tax for communication), and the centesima rerum venalium (sales tax on auctions). The Roman citizens did not pay taxes directly to Rome but to the province.

With the American Independence, we ended up with both federal and state taxation much different from ancient Rome. Some southern states imposed taxes on property income since colonial days. The Constitution empowered the federal government to raise taxes at a uniform rate throughout the nation, and required that “direct taxes” be imposed only in proportion to the Census population of each state. Federal income tax was actually first introduced under Abraham Lincoln with the Revenue Act of 1861 to fund the Civil War. It always appears to be a war that increases both debt and taxes. Lincoln actually argued unconstitutionally that states were NOT sovereigns, and with this line of thinking, he imposed an income tax that was renewed in later years and reformed in 1894 in the form of the Wilson-Gorman tariff.

There were legal challenges that argued whether the income tax then in force constituted a “direct tax” that was forbidden by the Constitution. In Springer v. United States 102 U.S. 586 (1881), the Supreme Court upheld the tax regime then in force. Then, in 1894, a new statute was overruled for being an unapportioned direct tax in the case of Pollock v. Farmers’ Loan and Trust Company 157 U.S. 429 (1895), affirmed on rehearing, 158 U.S. 601 (1895). This was the case that had to be overruled by the passage of the 16th Amendment. That was naturally created so States could then charge income taxes in direct violation of the original Founding Fathers since most were taken-in by Marxism.

In response to the passage of the 16th Amendment, proposed in 1909 and made law in 1913, our leftist sympathizing politicians of the time canceled the “apportionment” requirement for income taxes, allowing class warfare. Federal income tax was thereupon reintroduced in the Revenue Act of 1913 with the promise only those disgusting rich people would ever pay INCOME TAXES.

In Brushaber v. Union Pacific Railroad Company, 240 U.S. 1 (1916), the Revenue Act of 1913 was ruled to be constitutional. The 16th Amendment removed the requirement that income taxes be apportioned equally among the states according to population (Article I, Section 9, clause 4 of the U.S. Constitution). The Revenue Act of 1913 imposed income taxes that were not apportioned among the states according to their population. The Court stated: “…there can be no dispute that there was power by virtue of the Amendment during that period to levy the tax, without apportionment.” A separate excise tax was also imposed on corporations.

In United States v. James Daniel Good Real Property, 510 U.S. 43 (1993), the Court explicitly stated: “We have rejected the view that the applicability of one constitutional amendment pre-empts the guarantees of another.” The Court pointed to Soldal v. Cook County, 506 U. S. 56, 70 (1992), where they held that the seizure of property violated both the 4th and 5th Amendments. I believe the income tax is UNCONSTITUTIONAL, for you cannot overrule the restriction on proportional taxation by each member state that was the centerpiece of state rights and the retention of state’s rights in light of the Equal Protection Clause of the 14th Amendment. But in 1913, finding anyone who was not a Marxist-leaning politician or judge was hard. Only with the 1917 Russian Revolution did it become clear where socialism would lead. Although this is a valid legal argument, pressing it in courts will be fruitless, for today, they will NEVER strip the power of taxing individuals for income and threatening prosecution if they do not do as commanded by the Deep State.