An Income Tax Bloodbath A-Brewing?
Brian Doherty | January 19, 2007, 9:56am
In New Hampshire, a couple who believes they have no legal obligation to pay income tax is convicted; the wife Elaine Brown is in custody, while husband Ed Brown, with "25 armed supporters," barricades himself in their Plainfield home:
Brown, in a phone interview with The Associated Press, quoted Revolutionary War figure John Stark.
"Live free or die," he said. "What else can I say?"
Brown said he expected federal agents to swarm his property soon.
"My life is destroyed, what more can I say?" Brown said in a brief interview. "I lost my wife and she lost her business."
Brown warned he would not surrender to authorities.
"The verdict is in. I can guarantee you all hell's going to break loose," Brown said earlier in an interview with WNTK-FM in New London. "It's all bogus charges. None of these charges are lawful."
For now, at least, "marshals say they have no plans to raid the site."
My 2004 Reason feature story on the "we have no legal obligation to pay income tax" movement here.
zman | January 20, 2007, 3:13pm | #
The Federal Reserve is a private corporation, not a government agency. They have a license from Congress to print money.
According to the US Treasury:
"Federal Reserve Banks obtain the notes from our Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government."
Source - http://www.treas.gov/education/faq/currency/legal-tender.shtml
Still, the Reserve performs duties as a private corporation that might have been the fiduciary responsibility of Congress and the treasury. For instance, they are in charge of bank audits. Since the Federal Reserve is made up of banks and other financial institutions, I find that rather odd. They receive no outside audits?
Lastly, the Fed is the agency that permits the government to deficit spend. Once a budget is blown, Congress, who should come to the people and request more revenue, go behind our backs, without our permission and issue instruments of debt to the Fed. The Fed happily obliges using Federal Highways, Federal buildings and unclassified military equipment as collateral. To my knowledge it's never happened but that means your local interstate might turn into Citicorp highway, including tolls and we'd have no say in it.
Then politicians get on the, "we must pay off the debt" mantra. It would be nice if the lazy media asked "why?" You created it, you pay it. But I won't hold ny breath awaiting that event.
collective knowledge | January 20, 2007, 10:13pm | #
"Modern interpretation
In Commissioner v. Glenshaw Glass Co.,[12] the Supreme Court laid out what has become the modern understanding of what constitutes 'income' to which the Sixteenth Amendment applies, declaring that income taxes could be levied on "accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." Under this definition, any increase in wealth—whether through wages, benefits, bonuses, sale of stock or other property at a profit, bets won, lucky finds, awards of punitive damages in a lawsuit, qui tam actions—are all within the definition of income, unless Congress makes a specific exemption as it has for items such as life insurance proceeds received by reason of the death of the insured party,[13] gifts, bequests, devises and inheritances,[14] and certain scholarships.[15]
[edit] Recent rulings
On December 22, 2006, the United States Court of Appeals for the District of Columbia Circuit vacated its own August 2006 ruling in Murphy v. Internal Revenue Service and United States.[16] In its original August 2006 decision, the Court had ruled that 26 U.S.C. § 104(a)(2) was unconstitutional under the Sixteenth Amendment to the extent that the statute purported to tax, as income, a recovery for a non-physical personal injury for mental distress and loss of reputation not received in lieu of taxable income such as lost wages or earnings.
The Murphy ruling had been mandatory precedent only in the District of Columbia. The December 2006 order vacating the Court's own prior judgment also included a scheduling for a rehearing for April 23, 2007.
[edit] Tax protester arguments regarding ratification
The article Tax protester constitutional arguments covers this topic in considerably more detail, including details on the specific arguments made against ratification.
Some tax protesters, conspiracy investigators, and others opposed to income taxes cite what they contend is evidence that the Sixteenth Amendment was never "properly ratified." One such argument is that because the legislatures of various states passed resolutions of ratification with different capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas) from the text proposed by Congress, those states' ratifications were invalid. A related argument is that various states illegally violated procedural requirements of their constitutions when passing their ratification resolutions. Another argument made by some tax protesters regards Ohio, one of the states listed as ratifying the amendment. They contend that because Congress did not pass an official proclamation recognizing Ohio's date of admission (1803) to statehood until 1953 (see Ohio Constitution), Ohio was not a state until 1953 (and, therefore, could not have ratified the Sixteenth Amendment). These and similar arguments have been universally rejected by the courts."
kevrob | January 21, 2007, 9:33am | #
I'm not suicidal enough to be join the tax protestors, however much they may have my sympathy. One of my favorite anti-income tax arguments goes like this: Prior to the imposition of the Income Tax, an income, in plain English, was something you realized from an investment. Rent was income, as was interest on long-term government bonds and other securities. If you read 18th and 19th century fiction, when some middle or upper-class lady trying to arrange a suitable match for her daughter and some gentleman considered husband material, the fellow is inevitably described as "having an income of £(some large number) per annum."
In short, wages weren't considered income. Wages were undependable, and one had to do some kind of
work for them. "Income" was a river of cash, flowing like snowmelt from the mountain of capital owned by your family. At most you might have to hire a land agent or farm manager, and oversee your overseer. Eligible Young Gentlemen, when they came of age, often had An Income settled on them: the proceeds of This Estate or That Plantation, the interest from a specified amount of "gilts" issued by the Bank of England, etc. (We have the Long Bond. The UK under the gold standard had "centuries.") Junior would not necessarily own these assets, which his Pater might hold onto until passing away. Ownership might devolve on the younger man when he reached a certain age, or he married, as the family patriarch pleased.
So, when the Income Tax went through, yeoman farmers and factory hands never expected it to apply to them, and at the 1% rate mentioned above, it wouldn't, either. Only when the government's hunger for cash became ravenous did the income tax start touching on middle-class folks, then eventually those in the lower quintiles.
Of course, the IRS and the courts will not accept the "wages aren't income" argument, if for no other reason than that they believe that the
...from whatever source derived ... verbiage in the 16th Amendment authorizes the government to ignore what "income" meant of old, and supercede the English language with a legal term of art that happens to use the same letters in the same order. Since they have the power to enforce that, almost everyone has come around to their view.
Kevin
Peter K. | January 21, 2007, 5:39pm | #
Kevrob –
Yet another reason why the IRS and the courts will not accept the "wages aren't income" argument is that it is total, complete, utter bullshit.
Even if, as you say, at the time of ratification of the 16th Amendment “income” did not include wages, that just means Congress’ power to tax it does not derive from the 16th Amendment. Before and after the 16th Amendment, the Constitution said, and still does say, in Article I, Section 8:
"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."
Nothing in that taxing power excludes a tax on wages. Furthermore, the Supreme Court held that taxes on occupations were “excises” or indirect taxes, not subject to the apportionment requirement of Article I, Section 9.
The 16th Amendment did not give Congress any new taxing power. But to the extent the income tax is a "direct" tax, Congress is relieved by the 16th Amendment of the requirement to apportion it. Also, to the extent the income tax is an "indirect" tax, Congress was never subject to an apportionment requirement.
(Bear in mind, also, that in Pollock v. Farmers’ Loan & Trust Co. -- the case which held taxes on income from property to be “direct” taxes subject to the apportionment requirement, the reason for the subsequent proposal and ratification of the 16th Amendment – there was no challenge to the tax as it pertained to income from compensation for services.)
Therefore, Congress was free to define “income” to include wages and salaries. And (contrary to what this buffoon Aaron Russo says), it did. United States Code, Title 26 ,Subtitle A, Chapter 1, Subchapter B, Part I, section 61, subsection (a) says:
“Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including “(but not limited to) the following items:
“(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
“(2) Gross income derived from business;
“(3) Gains derived from dealings in property;
“(4) Interest;
“(5) Rents;
“(6) Royalties;
“(7) Dividends;
“(8) Alimony and separate maintenance payments;
“(9) Annuities;
“(10) Income from life insurance and endowment contracts;
“(11) Pensions;
“(12) Income from discharge of indebtedness;
“(13) Distributive share of partnership gross income;
“(14) Income in respect of a decedent; and
“(15) Income from an interest in an estate or trust."
Subsection (b) of same says:
“For items specifically included in gross income, see part II (sec. 71 and following). For items specifically excluded from gross income, see part III (sec. 101 and following). “
Wages and salaries are “compensation for services”, are they not?
kevrob | January 23, 2007, 12:21am | #
It does employ the term "income" which is itself in common usage. - Peter K.
Your point about legislators not having to include definitions of every common term in a law is valid. However, I explained above that what "income" meant in the 1860s, when an income tax was imposed to fund the Civil War, to what it meant in the Wilson administration, to what it means now, has changed. That change has been in no small part due to the expansion of the incidence of the income tax. Want to tax a stream of funds previously not taxed? Redefine it as "income." There are assuredly technical terms and terms of art - gross, adjusted gross, taxable, non-taxable, "earned", "unearned", etc., but the idea that "an income" is something derived from property ownership is today encountered only in the pages of Jane Austen.
Here's an alternative problem. I am against the death penalty, due to the lack of human infallibility in our justice system. Others try to claim that the DP is unconstitutional, leaning on the clause banning "cruel and unusual" puniahment. OK, the executionists said, we'll use more humane ways to kill people, and we will try to make judicial killing less unusual, too. The retort is that no form of execution can be sufficiently non-cruel. But the Constitution contemplates "capital crimes." In the late 18th century, that meant crimes punishable by death. Some moderns want to pretend that it doesn't mean that, just "the most serious crimes" that would merit life without parole. That might be an outcome I desire, but it is historically ignorant, and philosophically sneaky.
If one is going to take an existing word and use it in a novel way, the law had better include a non-tautological definition of it. If the law, when first enacted back when the word had a more limited sense, had said something on the order of:
"The following events, for the purposes of this Act, shall be considered income subject to tax:
1.) blah, blah, blah..., etc."
then I might criticize it for causing needless novelty in the language, but absolve it of trying to pull a fast one on the citizens. Perhaps there were such clear declarations in Lincoln's tax, or Wilson's or any other iterations of the Federal Income Tax, in which case my nit is not worth picking. But laws should not get magically amended by the shifting meaning of a word through time.
Kevin
Peter K. | January 23, 2007, 10:03am | #
kevrob --
For the third time: Even if everyone who supported the 16th Amendment at the time it was proposed and ratified thought what was meant by "income" is, as you say, a steady stream from an asset, it does not matter on the issue of the constitutionality of our present-day income tax. This is because the only reason the 16th was proposed was to relieve Congress of the burden of apportioning any taxation of income from assets.
The Supreme Court, in Pollock v. Farmers' Loan & Trust Co., said that the prevailing view among the founders was that wealth derived from property, that a tax on property is what the founders meant by a "direct" tax (subject to apportionment requirement in Section 9), and that a tax on the income from property is a "direct" tax, albeit accomplished by an indirect means.
Earnings from one's occupation were held (before Pollock) to be indirect taxes, excises, and thus not subject to the apportionment requirement of Article I, Section 9, and therefore the grant of taxing power in Section 8, as applied to these earnings, was unqualified.
In other words, if the 16th Amendment were to be repealed tomorrow, Congress could -- under Article I, Section 8 -- still tax wages, salaries, and profits from the sales of goods and services, without having to apportion them among the states.
But to tax income from rents, royalties, dividends, etc. Congress would have to apportion it among the states under Section 9. Which would mean they would not tax those forms of income.
Which, in turn, means even more of the burden of paying the tax would fall on working people (like the tax-resistin’ Browns) than it does now.
The definition of “gross income” is not tautological merely because it uses one of the two words comprising the term. Would it improve things if the introductory paragraph merely defined “gross”, as in “For purposes of this Chapter, income is “gross” if is [ . . .]”?
Now for the libertreee vs. libertreee debate:
libertreee:
"[quoting me: 'Wages and salaries are “compensation for services”, are they not?']
"Actuall[y], Peter, they are not . . ."
libertreee:
"wages are much more in the nature of an exchange of labor hours for money"
So wages are only wages if they are in exchange for labor, and only if the labor is not the performance of any particular service for the employer? Why the hell would the employer be hiring the laborer to work, if the labor does not accomplish some kind of service?
Just because corporations get compensated for services does not mean that human beings do not get compensated for services. Compensation for services are clearly included in the definition of "gross income". Wages and salaries earned by an employee, or payment for services made to an independent contractor, are "compensation for services".
Congress also included income from "alimony" in the definition of "gross income". Under what circumstances would a corporation be receiving alimony? The statute plainly applies to people.
"These payroll taxes are direct taxes without apportionment."
See above. They are not taxes on account of property owned by the payor, therefore they are not "direct" taxes. The Constitution assigned the interpretive function in cases and controversies to the Supreme Court, and this is what the Supreme Court said.
". . . the primary definition of "income" by the Supremes with reference to the 16th Amendment has to do with the Corporation Tax Act of 1909, which was the Act for which the 16th was passed"
Interesting theory. So Congress passed the Corporation Tax Act in 1909. Mr. Pollock decided to challenge it, but the Supreme Court docket was much too crowded, so he got into his time machine, flew backwards to 1895, got the Supreme Court to invalidate the 1909 tax in 1985, then he flew forward to 1909, only to find out that Congress had proposed the 16th Amendment, so he gave up and the states ratified it in 1913.
kevrob | January 23, 2007, 11:32am | #
Quoting Peter K.:
In other words, if the 16th Amendment were to be repealed tomorrow, Congress could -- under Article I, Section 8 -- still tax wages, salaries, and profits from the sales of goods and services, without having to apportion them among the states.
..and I continue to say that, had that been attempted, in peacetime at least, in the 19th century it would have been a
political non-starter. The tax imposed during the Civil War was allowed to lapse in 1872, based in part on citizen's annoyance at alleged corruption and malfeasance in the Bureau of Internal Revenue, and because prosperity having returned, enough revenue could be generated from tariffs and more traditional excises.
But to tax income from rents, royalties, dividends, etc. Congress would have to apportion it among the states under Section 9. Which would mean they would not tax those forms of income.
Which, in turn, means even more of the burden of paying the tax would fall on working people (like the tax-resistin’ Browns) than it does now.
Again, back in the day, far fewer people worked for wages and salaries, subsistence farming being much more common than it is today. I'd hate to have to figure out what the "adjusted gross income" of yeoman Farmer Brown was in 1880, not to mention some sharecropping tenant farmer. An income tax that roped in such folks wouldn't fly. And again, this is not a modern constitutional argument, but one about political history. After the end of the civil war, an income tax was seen as a way of redistributing wealth from the "money power" located in the northeast, the trusts and the "plutocrats", to the poorer South and West. Without the removal of the apportionment restriction, that couldn't happen, because, following the "Willy Suttton Principle," that's where the money was.
Your point about sales taxes not needing to be apportioned does mean that we could repeal the 16th Amendment and replace it with a national sales tax or VAT,
a la the Fair Tax movement. I would much rather our representatives reduce or replace income taxation than have a court strike the IT down. Should such an opinion ever be issued, Congress and/or the States would write a reauthorizing amendment so fast it would make our heads spin.
Kevin
