Section 1. Office of the Federal Reserve established as the Fourth Branch.

All Powers for the raising of Revenue, the retirement of the national debt, and the regulation of the value of the currency of the United States shall be vested in the Office of the Federal Reserve, which shall be comprised of nine Chancellors appointed by the President of the United States, with the advise and consent of the Senate, and bound by Oath or Affirmation to support this Constitution. Each Chancellor shall hold Office during Good Behavior and shall, at stated Times, receive for their Services a Compensation which shall be determined from Time to Time by the House of Representatives, but which shall not be diminished during their term in Office. One of the Chancellors shall be designated, at the time of his appointment, as the Chairman of the Federal Reserve.

Section 2. Methods of Raising Revenue

The Office of the Federal Reserve shall raise such revenues as are consistent, in the final judgment of a majority of the Chancellors, with the economic health of the United States. The raising of all revenues shall be accomplished with fairness and equal sharing of the burden among the people. The power to levy taxes, duties, imposts and excises shall be used only for the raising of revenue for the operation of Government and for regulation of the value of the currency, and it shall not be an instrument for the promotion or inhibition of any activities of the people. If a tax on income shall be employed, then the definition of taxable income shall be made uniform for all Persons and other income-owning Entities without regard to the sources, the amount, or the disposition of that income, and each Person and Entity shall be assessed the same percentage of that taxable income.

All taxes levied by the United States shall be billed by the Office of the Federal Reserve directly to the taxpayer, and no Person or Entity shall be required to collect and forward another’s taxes on behalf of the Government.

The Office of the Federal Reserve shall have the power to collect revenues in amounts greater or less than those which they may allow to be disbursed in any given year in order to regulate long term economic cycles and to provide for the conduct of War and to equalize over time the cost of National Emergencies.

Section 3. Budgeting and Disbursement of Funds

Except in time of War or National Emergency, the existence of which shall have been Declared by the President and by a two-thirds majority of the House and of the Senate, the Office of the Federal Reserve shall disburse only such revenues as are consistent, in their final judgment, with the economic health and welfare of the United States. If declared states of National Emergency other than War shall by this provision require disbursements in excess of the Federal Reserve's budget for any part of two consecutive fiscal years, the Office of the Federal Reserve shall recover the exercise of all powers under this Article, notwithstanding any declarations of National Emergency, during the subsequent three fiscal years.

On the First Tuesday in June of each year, the Chairman shall report to the President and the Congress assembled on the State of the Treasury and the Economy. He shall on that day publish a Statement and Account of the Receipts and Expenditures of all public money, and he shall on that day announce the budgeted amount which the Federal Reserve, by vote of a simple majority of the Chancellors, has authorized for disbursement during the next fiscal year of the Government.

The Office of the Federal Reserve shall have no power to selectively refuse or delay the disbursement of funds for any purpose which has been authorized for expenditure by the legislature, but when during each fiscal year the announced limit has been reached, the Office of the Federal Reserve must either terminate disbursements or, upon a vote of a two-thirds majority of the Chancellors, announce a revised limit for that fiscal year.

Nothing in this Article shall be construed to limit the power of the Congress to authorize disbursement, within the limits announced by the Office of the Federal Reserve, of funds for certain purposes even though such disbursements may have the effect of altering the fairness and equality of the Federal Reserve's distribution of the economic burden.

Section 4. Conflicting Clauses Repealed.

The first clause of Section 7, Article 1, and clauses 1, 2 and 5 of Section 8, Article 1, and clauses 4 and 7 of Section 9, Article 1 are superseded by this Article and are henceforth excluded from the Powers of the Legislative branch; and Article XVI of this Constitution is hereby repealed.

Section 5. Ratification

Within 90 days after ratification of this Amendment in accordance with Article 5, The President shall present 9 nominations of candidates for Chancellor and at least 5 alternates to the Senate for their consent, naming one to be Chairman. If after 180 days from ratification there remain any Chancellor seats unfilled, then on the one hundred and eighty-first day, the Chief Justice of the Supreme Court shall fill those remaining seats from among the nominees presented by the President, notwithstanding that some or all may have been disapproved by the Senate.

Operation of the new Federal Reserve under the terms of this Amendment shall commence on January 3 of the first government fiscal year following the fiscal year in which the Amendment is ratified. The new Federal Reserve shall honor the existing budget for that fiscal year, and shall continue to provide revenue for the remainder of that calendar year according to the laws then in effect. Full application and administration of the provisions of this Amendment by the new Federal Reserve shall commence on January 1 of the second fiscal year following the fiscal year in which the Amendment is ratified.

DISCUSSION

Section 1. Office of the Federal Reserve established as the Fourth Branch.

The principle of checks and balances is enshrined in the Constitution and has served the nation well. It is reasonable, therefore, when it becomes evident that an essential function of government is running unchecked and out of balance, to extend the principle so that it becomes operative with respect to that particular function. It is in fact evident that the power to collect and spend the people's money and manage or mismanage the public indebtedness is unrestrained by any limitations in the Constitution and has in fact been running unchecked at least since the passage of the Income Tax amendment.

The founding fathers reasoned that the power to write the law and the power to enforce the law belonged in separate hands. It has become clear in the twentieth century that the power to spend the people's money must be similarly separated from the power to regulate the economic impact of taxation and borrowing.

Section 1 consolidates taxing and economic regulation functions into the Federal Reserve and elevates it into a new, independent branch of government whose purpose is to regulate and balance the good intentions of Congress, the President, and the Supreme Court against the limitations of the nation's economic bounty. This new branch of government will assess the impact of governmental programs upon the economic environment and will establish limits to prevent undue damage to that environment. As with the members of the Supreme Court, the members of this new branch are appointed by the President, with the advise and consent of the Senate, because the needs of the economy, like the requirements of justice, bow to political expediency only at the cost of chronic and perhaps fatal decline.

The power of this new branch to limit spending by the government is itself balanced by key provisions of Section 3. Those provisions ensure that the Federal Reserve has no say in the purposes for which government funds will be spent, even if those purposes may contravene the fairness with which the taxes were assessed. This allows Congress to selectively reduce the burden of taxation on the poor, for example, by returning a portion of the money collected to them in the form of entitlements.

It is envisioned that this new constitutional definition of the Federal Reserve will combine the structures and institutions of the Treasury, the Federal Reserve, the Office of Management and Budget, and the Internal Revenue Service into its own operations, since Sections 1 and 4 of this Amendment remove those functions from the domains of the Executive and Legislative branches. It is desired that the additional costs of this increase in the volume of the bureaucracy will be more than compensated by the cost-effectiveness that it imposes on the older structures. It is hoped that the Legislative and Executive branches will exercise greater creativity in legislation and enforcement once they are relieved of the temptation to confuse public policy with public finance.

Section 2. Methods of Raising Revenue

This Section prevents the new Branch from extending its powers into the domain of the Congress through any exploitation of the rewards and punishments of taxation. That is the reason for the "fair and equal" requirement on the distribution of the economic burden. Without this requirement, the new Branch would have powers equivalent to those of the other three Branches that it could exercise by the way in which it assesses and collects the taxes. Should the Congress determine that certain actions of the people are to be punished or rewarded, then it may enact non-monetary incentives or punishments, or it may provide for monetary "entitlements" within the limitations of the Federal Reserve's limits on disbursements.

The practical definition of "fair and equal" in the assessment of taxes is expected to be developed by Congress and the courts in the course of time. It is not wise to be too specific on this in the statement of the amendment, just as the framers chose not to be too specific on terms such as "due process". We may make some of our thinking on this clear at the outset, however. There is a popular myth that the progressive income tax is justified by the fact that those whom our system benefits the most are rightfully made to sacrifice the most for its maintenance. In fact, our system is based on equal opportunity for rich and poor alike, and whenever it is found that any public official, or any agency, or any law systematically offers opportunities to the rich that are not offered to the poor, such condition is, or should be, quickly rectified. It could as easily (and as fallaciously) be argued that the income tax should be regressive because government should provide tax penalties for the squandering of economic opportunity – a major national resource.

Note that this "fair and equal" limitation on the distribution of the economic burden expressly prohibits the government from inhibiting even criminal activity through the assessment of fines. Thus, in particular, the federal government may not collect monetary penalties for crimes and code violations. A monetary penalty may be permitted under this amendment only if the proceeds compensate the victim or go to some other non-government use. If the Congress wishes to provide punishment for offenders that is less burdensome according as the offender is more wealthy, then the Congress will have to explain and defend such plans to their constituency rather than hiding the effect within a traditional but unwise practice. These limitations do not, however, extend or apply to the separate States, which may continue to use fines as a means of punishment for crimes and misdemeanors.

The “fair and equal” limitation also prohibits the government from using taxes and duties for the selective protection of industries from importation of foreign goods. Again, Congress may avail itself of prohibitions and non-monetary penalties for this purpose, or it may subsidize threatened industries by the disbursement of funds within the Federal Reserve's announced limits. But it may not impose "restrictive" duties.

Although Section 2 explicitly defines the meaning of "fair and equal" as it pertains to taxation of income, the requirement has important implications for other common taxes as well, including duties, excise taxes, usage fees, ad valorem taxes, and estate taxes. Excise taxes on motor vehicle fuel, alcohol, telephone service and cigarettes, for example, must either be eliminated or generalized to apply fairly to the sale of all commodities. Estate taxes violate the uniform definition of income and must be eliminated. Where usage fees were once considered appropriate, an appropriate alternative might be to privatize the function.

To help ensure fairness, Section 2 also prohibits the government from collecting any taxes through intermediaries. This means, in the case of income taxes, that the government may not require employers to collect and forward their employees’ taxes. The reason for this is that when people are taxed through intermediaries it is possible to hide from them a full and clear understanding of the full amount that they are paying and the fairness of their share of the burden. It might be argued that this will prevent businesses from passing their taxes through to their customers, but that is not the case. It will be clear that everyone, businesses and individuals alike, will pass the cost of their taxes through to whoever pays for their products and labor. They may, in fact, disclose on their invoices what portion of the bill is attributed to Federal taxes if they choose to; and if they do this then when the people compare their own tax rates against those of their employers and suppliers, they will be able to see for themselves the degree to which the Office of the Federal Reserve has succeeded in equalizing the tax burden among all taxpaying entities. It is presently impractical if not impossible to do this because of the difficulty of accounting for indirectly assessed taxes.

Section 3. Budgeting and Disbursement of Funds

This section establishes the mechanism for cooperation between the Federal Reserve and the Executive and Legislative branches. The first paragraph makes it clear that the Federal Reserve's responsibility is to the economy and that it is their final judgment that determines the impact that the plans and programs of the government will be allowed to have on the economy. The first paragraph allows that judgment to be overridden by the concerted determination of the Executive and Legislative branches that a national emergency exists, but it also anticipates that "emergencies" may be declared too easily. In the event that the Executive and Legislative branches are unable to limit the economic impact of such "emergencies" to at most one year in four, this paragraph provides for the restoration to the Federal Reserve of its veto power over expenditures in excess of the Federal Reserve’s budget.

The second paragraph provides a time for the Chairman to account for past receipts and expenditures and to announce his budget each year and to explain the reasons for it. The time provided is intended to allow adequate time for the government agencies to adjust their spending plans before the beginning of the next fiscal year. There is no requirement for the Chairman to be blunt and candid, any more than the President is required to be blunt and candid in the annual State of the Union message. But it is hoped that since the Chancellors are appointed, rather than elected, the message will provide insight and guidance for wage-earners, business leaders and government officials, rather than simply serve as a forum for salves and slogans.

The second paragraph also prohibits the interference by the Federal Reserve in the priorities that have been established by the Legislative and Executive branches for their expenditures. It is expected that the Legislature will present requests for disbursements that do not exceed the Federal Reserve's announced limits, but if they should deliberately present requests during a fiscal year that exceed the limit, then the Federal Reserve may, by a decision of the majority thereof, pay in accordance with the Legislature's stated priority for the various programs, or lacking such a priority list, the Chancellors may assume that the temporal order of presentation of warrants for payment constitutes the de-facto payment priority, so that the first such warrant that would exceed the limit, and all subsequent warrants through the end of the fiscal year, may go unpaid. The Federal Reserve has the power, however, to increase the limit at any time if in the judgment of a two-thirds majority (6 of the 9 chancellors) it is more important to disburse funds for one or more of the remaining presentments than it is to preserve the limit.

The third paragraph of this Section provides explicit confirmation that it is not the intention of this Amendment to prevent the Congress from effectively easing the tax burden on such groups as it deems appropriate by returning a portion of the government's revenues to these groups in the form of entitlements or other grants. It is the intention of this Amendment, however, to deprive the Congress of the luxury of awarding such entitlements without regard to their impact on the economic well-being of the nation. This is accomplished by ensuring that the Congress must allocate such expenditures each year from a budget whose limits are independently and professionally determined.

It is understood and acknowledged that income from entitlements cannot be excluded by the Federal Reserve (and certainly not by Congress) from taxable income if income shall be used as a source of revenue for the Government. To do so would violate the “fair and equal” requirement. It is further understood and acknowledged that the practical implementation of such entitlements may require some creative procedures. For example, if tax returns – and payments – are due on April 15 and Congress desires to abate the income tax for all persons with less than, say, $20,000 of annual income, then Congress must provide a mechanism for supplementing their incomes prior to April 15 with an amount which, after taxes, is equal to the tax on their pre-supplement income. Such a supplement must be greater than the desired after-tax supplement by a factor of 1/(1-taxrate). If the Congress finds that this becomes a burden to their budget requirements, the author of this Amendment finds that to be fitting and appropriate.

Section 4. Conflicting Clauses Repealed.

This section removes or supersedes other clauses of the Constitution that are in conflict with the provisions of this Amendment.

Section 5. Ratification

The ratification provision allows for ratification according to either of the two procedures provided in Article 5 of the Constitution, allowing for a recent tendency of the Senate to drag its feet with confirmations of appointees by Presidents from the minority political party. It also provides for an expeditious but orderly transition from the old methods to the new methods.

APPENDIX

Suggestions, objections, corrections, and replies thereto.

August 20, 1999, by Don Bynum of Boerne, TX

One of the battle cries of the American revolution was “No taxation without representation.” This proposed amendment seems to undo what our forefathers fought for.

Reply: The amendment certainly modifies what they fought for, but it does not remove the essential element of representation. The amount of money required by the government is still determined by the people’s representatives in the legislature, but under this amendment those representatives are constrained against legislative abuses that were perhaps not envisioned by our forefathers. This amendment preserves representation while implementing checks and balances to correct and prevent the excesses and inequities that have evolved in the twentieth century. If they were to see how we are taxed today, our forefathers would surely change their high regard for the ability of representation alone to ensure fairness and restraint. Our forefathers took the first step in the 18^th Century. What we must fight for at the close of the Twentieth Century is, “No unfair or excessive taxation even WITH representation!”