The words

Read by their syntax, the clauses that bear on the loop grant powers, name their holders and fix where Bills begin. None speaks of inflation. Two of them decide the case. The Origination Clause governs Bills, not revenue as such, and Clause 5 gives Congress a power to regulate the Value of money, not a duty to keep it fixed.

Article I, § 7, cl. 1 · The Origination Clause

U.S. Const. art. I, § 7, cl. 1 All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

Syntax. The subject is All Bills. All quantifies Bills, and the phrase for raising Revenue restricts the class: the Bills whose office is to raise revenue. The verb is shall originate, a command, and in the House of Representatives says where. After the semicolon, but opens a second clause that keeps the Senate’s power to amend “as on other Bills”, which confirms that the class is a class of Bills. Revenue appears once, as the object of the gerund raising, inside the modifier.

What the grammar allows and excludes. It allows one command: every Bill for raising Revenue begins in the House. It excludes a command about revenue apart from the Bill that raises it. Nothing in the clause speaks of how much a tax yields, or of a rise in yield as prices rise, or of revenue that originates anywhere. Only Bills “originate”. Text 01’s premise that “the additional revenue is originated through executive monetary action” makes revenue the subject of originate, and the clause’s syntax gives that verb one subject.

What a Bill is. The next clause defines it by what it passes through: “Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law,” be presented to the President. A Bill is a measure passed by both Houses. A rise in prices passes neither, so it is not a Bill.

What “Revenue” meant. Webster (1828): “The annual produce of taxes, excise, customs, duties, rents, etc. which a nation or state collects and receives into the treasury for public use.” Revenue is the produce of a tax. A Bill for raising Revenue is one that levies the tax, and what the tax yields is the revenue it raises, at whatever level of prices.

The canon. “It cannot be presumed, that any clause in the constitution is intended to be without effect” (Marbury v. Madison, 1803). Read by its syntax, the clause governs every Bill for raising Revenue. The Bills that enacted the tax on gains began in the House: H.R. 3321 in 1913, H.R. 8300 in 1954 and H.R. 3838 in 1986. The clause therefore has its full effect on them, and no reading that leaves it governing every such Bill renders it surplusage.

Article I, § 8, cls. 1 and 2 · To tax and to borrow

U.S. Const. art. I, § 8, cl. 1 The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

U.S. Const. art. I, § 8, cl. 2 To borrow Money on the credit of the United States;

Syntax. The Congress shall have Power governs every clause of § 8. In clause 1 the object is four nouns of exaction, Taxes, Duties, Imposts and Excises. The infinitive phrase to pay the Debts and provide for the common Defence and general Welfare states the purposes for which they may be laid. The proviso after but binds Duties, Imposts and Excises to uniformity and leaves Taxes out of it. Direct taxes have their own rule, apportionment (§ 9, cl. 4). Clause 2 is a second power under the same verb: To borrow Money on the credit of the United States.

What the grammar allows and excludes. The words name two means of paying for government, taxes and borrowing. They do not make taxes the exclusive means. Text 02’s “mechanism the Constitution prescribes—visible taxes to cover spending” names the first and leaves out the second, which stands in the next clause. The words “to pay the Debts” presuppose debts, and the next clause is where they come from.

What “Tax” meant. Webster (1828), first sense: “A rate or sum of money assessed on the person or property of a citizen by government, for the use of the nation or state.” The same entry adds that the word is “a term of general import, including almost every species of imposition on persons or property for supplying the public treasury, as tolls, tribute, subsidy, excise, impost, or customs.” The primary sense is a rate or sum assessed on someone, and inflation assesses neither on anyone. The general sense reaches “almost every species of imposition”, and inflation is an imposition only in an extended sense: nothing is laid on any person or any property.

Article I, § 8, cl. 5 · To coin Money, regulate the Value thereof

U.S. Const. art. I, § 8, cl. 5 To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

Syntax. Under The Congress shall have Power stand three infinitives: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Thereof points to Money, the money Congress coins, and and of foreign Coin extends the same verb to the value of foreign coin. The holder is Congress. The clause grants a power and lays down no duty: it says regulate, not preserve or keep.

Two verbs. The clause gives money’s Value one verb and weights and measures another. Congress may regulate the Value of money, and it may fix the Standard of Weights and Measures. Under the presumption of consistent usage, a text that changes its word changes its meaning. A fixed standard is what the clause gives weights and measures, and a regulated value is what it gives money.

What “regulate” and “value” meant. Webster (1828) gives three senses of regulate:

1. “To adjust by rule, method or established mode; as, to regulate weights and measures; to regulate the assize of bread”.
2. “To put in good order; as, to regulate the disordered state of a nation or its finances.”
3. “To subject to rules or restrictions; as, to regulate trade”.

Value: “Price; the rate of worth set upon a commodity, or the amount for which a thing is sold.” To adjust by rule includes to change. In 1781 the Articles of Confederation had given Congress “the sole and exclusive right and power of regulating the alloy and value of coin struck by their own authority, or by that of the respective States”. In 1791 Hamilton wrote of coins whose makers would “incorporate in the coins a greater proportion of alloy, than is usual, regulating their value nevertheless according to the quantity of pure metal, they contain.” Regulating a coin’s value meant setting its metal and the rate at which it passes. In 1834 Congress did exactly that. The Act of 1792 gave the eagle, “each to be of the value of ten dollars or units”, “two hundred and forty-seven grains and four eighths of a grain of pure” gold, and the Act of 1834 gave it “two hundred and thirty-two grains of pure gold”.

What the clause does not say. It does not say that the Value of money must stay constant, that a body other than Congress may regulate it in its own right, or that managing the quantity of money is or is not regulating its Value. Each of these is a premise the argument needs and the clause does not supply, and each is graded where the argument uses it (A1, AU1, AU2, BU8).

Article I, § 8, cl. 6 · Counterfeiting

U.S. Const. art. I, § 8, cl. 6 To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

Syntax. The Congress shall have Power governs again. The object is the Punishment of counterfeiting, and counterfeiting takes two objects, the Securities and current Coin of the United States. The clause guards the coin’s value against private hands. Madison: “The punishment of counterfeiting the public securities, as well as the current coin, is submitted of course to that authority which is to secure the value of both.” The Court traced the offense to “the correspondent and necessary power and obligation to protect and to preserve in its purity this constitutional currency” (1850). The clause sets no limit on Congress’s own power over value.

Article I, § 8, cl. 18 · Necessary and proper

U.S. Const. art. I, § 8, cl. 18 To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

Syntax. Congress makes the laws, and departments and officers carry them out. The clause joins the money powers to the means of executing them. In the Court’s words, “The broad and comprehensive national authority over the subjects of revenue, finance, and currency is derived from the aggregate of the powers granted to the Congress”, this clause among them (Norman, 1935; the holding is weighed in What courts have held).

Article I, §§ 9 and 10 · Sums in dollars, direct taxes, the public account and the States’ tender

U.S. Const. art. I, § 9, cl. 1 (part of the clause) but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.

U.S. Const. amend. VII (part of the sentence) In Suits at common law, where the value in controversy shall exceed twenty dollars

The Constitution counts value in dollars. It states a sum, “ten dollars”, and it measures “the value in controversy” in “twenty dollars”. Its own unit of value is the dollar, the money of account that the Coinage Act of 1792 fixed: “the money of account of the United States shall be expressed in dollars or units”. Neither text speaks of a dollar of constant purchasing power. Read for consistent usage, the Constitution’s measure of value is the unit Congress defines. That bears on what “incomes” are counted in (AU4, AX4).

U.S. Const. art. I, § 9, cl. 4 No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.

Direct taxes. The Constitution names direct taxes twice. Article I, § 2, cl. 3 joins them to representation: “Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers”. Section 9, cl. 4 names one direct tax, the capitation, and leaves “other direct” taxes undefined. Where the line falls decides whether a tax on a gain needs the Sixteenth Amendment at all (AU7, K-A4).

U.S. Const. art. I, § 9, cl. 7 No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

The public account. Receipts are to be published. The words make taxes visible in the account; they say nothing of inflation.

U.S. Const. art. I, § 10, cl. 1 No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Whom it binds. The subject is No State. The ban on bills of credit and the rule of gold and silver tender bind the States. Under expressio unius, a Constitution that laid these limits on the States in terms laid none like them on Congress in terms. The Convention’s striking of “and emit bills” from Congress’s borrowing power is set out in The meaning of the time.

The Fifth Amendment · Due process

U.S. Const. amend. V (the due process and takings clauses) nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Syntax. Both clauses are negations whose subject is the person: nor be deprived of property without due process of law; nor shall private property be taken without just compensation. Neither names the taxing power. The Court has read the first as no limit on it, “since it is equally well settled that such clause is not a limitation upon the taxing power conferred upon Congress by the Constitution”, save where “the act complained of was so arbitrary as to constrain to the conclusion that it was not the exertion of taxation but a confiscation of property, that is, a taking of the same in violation of the Fifth Amendment” (Brushaber v. Union Pacific R. Co., 240 U.S. 1, 24-25 (1916)).

What it does to the loop. In real terms the inflation part of a gain is capital returned, and a tax on it takes capital: that is the strongest case for the door Brushaber left open. The cases the study lists measure gain in the dollar Congress defines: “a dollar is what Congress says it is, without regard to intrinsic value or lack thereof” (Gajewski, T.C. 1976), and gain “must be measured on the basis of the nominal gain on the sale of property” (Nordtvedt, T.C. 2001). None of them holds a tax on nominal gain to be a confiscation.

The Sixteenth Amendment · Taxes on incomes

U.S. Const. amend. XVI 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.

Syntax. The subject is The Congress, the verb shall have, and the object power to lay and collect taxes on incomes. From whatever source derived modifies incomes: the source does not matter. Without apportionment among the several States, and without regard to any census or enumeration modifies to lay and collect: the tax is laid without the rule of § 9, cl. 4. The Amendment speaks of what incomes are taxed and how the tax is laid. It names no unit in which an income is counted and no adjustment for prices.

What the words leave to their meaning. The word “incomes” is nowhere defined in the Constitution. What it meant in 1909–13, and in what unit an income was counted, is shown from the evidence of the time (The meaning of the time; AU4 and AX4). The Revenue Act of 1913, H.R. 3321, passed eight months after ratification. It laid “a tax of 1 per centum per annum” upon “the entire net income arising or accruing from all sources”, and that net income included “gains, profits, and income derived from salaries, wages, or compensation for personal service” and “gains or profits and income derived from any source whatever”.

The Code · §§ 61, 1001, 1011, 1012, 1016 and 1(f)

26 U.S.C. § 61(a) Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: … (3) Gains derived from dealings in property;

26 U.S.C. § 1001(a) The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.

26 U.S.C. § 1001(c) Except as otherwise provided in this subtitle, the entire amount of the gain or loss, determined under this section, on the sale or exchange of property shall be recognized.

26 U.S.C. § 1012(a) (opening) The basis of property shall be the cost of such property, except as otherwise provided in this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses).

26 U.S.C. § 1011(a) The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under section 1012 or other applicable sections of this subchapter and subchapters C (relating to corporate distributions and adjustments), K (relating to partners and partnerships), and P (relating to capital gains and losses)), adjusted as provided in section 1016.

26 U.S.C. § 1016(a) (opening words) Proper adjustment in respect of the property shall in all cases be made—

26 U.S.C. § 1(f) (heading) Phaseout of marriage penalty in 15-percent bracket; adjustments in tax tables so that inflation will not result in tax increases

What they do. Gain is the amount realized over the adjusted basis. Basis is cost, adjusted as § 1016 provides, and § 1016(a)’s paragraphs, (1) through (38), contain no adjustment for inflation, a price index or purchasing power. The whole gain is recognized. Section 1(f) adjusts the rate tables “so that inflation will not result in tax increases”. Under expressio unius, a Code that indexes the tables in terms and leaves basis at cost has chosen nominal gain for basis. The Justice Department read “cost” as “price paid in nominal dollars not adjusted for inflation”, and held that “The Department of the Treasury does not have legal authority to index capital gains for inflation by means of regulation” (1992).

Where they began. Sections 61 and 1001 were enacted on August 16, 1954 (68A Stat. 17, 295), in H.R. 8300, the Internal Revenue Code of 1954. Section 1(f) came from § 104 of the Economic Recovery Tax Act of 1981, H.R. 4242, headed “ADJUSTMENT TO PREVENT INFLATION-CAUSED TAX INCREASE”. The Code of 1986 came from H.R. 3838. Each began in the House.

The money statutes · 31 U.S.C. §§ 5101, 5103 and 3101; 12 U.S.C. §§ 225a, 263 and 411

31 U.S.C. § 5101 United States money is expressed in dollars, dimes or tenths, cents or hundreths,[1] and mills or thousandths. A dime is a tenth of a dollar, a cent is a hundredth of a dollar, and a mill is a thousandth of a dollar.

12 U.S.C. § 225a The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

12 U.S.C. § 263(b) (first sentence) No Federal Reserve bank shall engage or decline to engage in open-market operations under sections 348a and 353 to 359 of this title except in accordance with the direction of and regulations adopted by the Committee.

31 U.S.C. § 3101(b) (part of the subsection) may not be more than $14,294,000,000,000, outstanding at one time, subject to changes periodically made in that amount as provided by law

What they show. The unit is the dollar. Section 5101 fixes no content in metal or in goods, and since H.R. 13955 (1976) repealed the par value in gold, no statute does. Congress directs the Federal Reserve to promote “stable prices”, in words enacted in 1977 as H.R. 9710. It places open-market operations under the Committee, and it sets the limit within which the Treasury borrows. The actor in the loop is therefore not the House acting by a Bill. It acts under statutes that passed the House. ([1] is the Code’s own note, “So in original.”)