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Still working on the 861 post. Just letting both my readers know I haven't forgotten about it.

Ongoing debate

Just preserving an ongoing debate over at Shouting In the Dark

Fogy411 said...
Fool, et al.

Sorry this is long, but you're either informed or you're ignorant. The truth takes effort sometimes.

Lady Bonds:
It is important and proper to make the distiction between paying the taxes you owe and not paying the taxes you don't owe. It is equally important to understand where the taxes that you may owe go.

You ask "Should I stop paying Federal Income Taxes?" My response would be "Have you personally determined that you owe Federal Income Taxes? Have you studied the laws and have you eliminated any legal ambiguities until you know precisely that you are a taxpayer and not a non-taxpayer under the law?" The average person's answer would be "No. I pay because someone told me I have to."

It is generally assumed that "You must pay your Income Tax to fund the government."

If that were true, what then did the government run on for the 150 odd years before the Income Tax was supposedly imposed upon us in 1913?

It ran on legal excise taxes, etc., as it does today. Remember, schools are paid by property taxes, roads by gas taxes, etc. What is paid by personal Income Taxes? Read The Grace Commission report of 1984: 1/3 = administration and waste, 1/3 goes uncollected and the remaining 1/3 goes to paying off the national debt (Federal Reserve private profit).

There are several revenue sources for the government; Corporate taxes mostly. That's your military budget right there. Compare the annual corporate tax revenue to the military budget, see what happens. Other constitutional government tax revenue sources are social security taxes, revenues such as excise taxes on cigarettes, alcohol, tobacco, firearms, tires, etc., tariffs on trade, military hardware sales, and some minor categories. THESE are your tax dollars they are talking about when they buy $600 toilet seats.

$0.00 personal Income Tax revenue goes towards $600 toilet seats and other "taxpayer" services. Remember, that was Ronald Reagan's own commissioned report for government revenue accountability.



As the saying goes: "Baffle them with Bullshit."

There is enough fodder in our legal history and written code for anyone to BS anyone else who fails to do their own research. Shilling for the government is the oldest trick in the book, and obviously alive and well. As always, be wary of BOTH sides.

Steve may or may not be a government shill. That's for you to decide. It certainly looks convincing, especially for readers of this blog who may not be familiar with the detials. It certainly would baffle many people. But I call Bullshit!

Just enough is said to be convincing, without giving the whole story. For someone new to the debate it seems pretty straight forward. However, for someone familiar with the history and constitutional limitations, there's a lot missing.

A prime example: He puts forth the pitiful claim that 26 U.S.C. Section 1 presents "The Law" that imposes a tax on individuals. 26 U.S.C Section 1 is the start of the entire tax code! He can't produce the single statute, he just tossed the entire tax code at you. It's a dead givaway that he hopes those ignorant of the law will be hit smack in the face with "There is hereby imposed on the taxable income of (supposedly you)..." and come to the quick and painless conclusion that the Income Tax applies to them.

Anybody who does even a little research knows that referring you to page 1 of the tax code and saying there's your proof is not being straight with you. In fact, that's such a lame scarecrow attempt that I'm surprised he threw it in there.

He then blunders into this statement: "It is a fundamental maxim of statutory construction that later acts trump earlier ones. Prior law which is inconsistent with, and on an equal level of authority with, a new law is implicitly revoked. Whether or not a priro law "followed the 861 argument" is immaterial, because that law is gone."

What he fails to mention is that for every revision of the tax code it has been explicitly stated by Congress that the scope of the law has not changed significantly. It has only been reworded over time into the legally similar but deceptive version we have today. Another deception.

All that hullabaloo that Steve mentions about the ratification of the 16th is irrelevant and a smoke screen. Whether or not it was ratified, it has no effect on us as individuals.

The following is my presentment of the case:

Eisner vs Macomber 252 U.S. 189 at 205 (1920). "The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the Amendment was adopted."


Brushaber vs Union Pacific R.R. Co 240 U.S. 1 at 10-11 (1916).
It states "The various propositions are so intermingled as to cause it to be difficult to classify them. We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the Sixteenth Amendment provides for a hitherto unknown power of taxation, that is, a power to levy an income tax which although direct should not be the subject of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it, ..."


Stanton vs Baltic Mining Co. 240 US 103, at 112 (1916) "By the previous ruling, it was settled that the Sixteenth Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation, possessed by Congress, from the beginning, from being taken out of the category of indirect taxation, to which it inherently belonged..."


"The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax."



The contention that the Amendment treats a tax on income as a direct tax, although it is relieved from apportionment, and is necessarily therefore, not subject to the rule of uniformity, as such rule only applies to taxes which are not direct, thus destroying the two great classifications which have been recognized and enforced from the beginning, is wholly without foundation..." Brushaber at page 18

Continuing: " The conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but on the contrary, recognized the fact that taxation on income, was in its nature, an excise, entitled to be enforced as such..." pg 16-17


There it is! The 16th Amendment left the income tax as an indirect excise tax and is to be enforced as such. It is a tax on corporate incomes not requiring the tax to be apportioned!




From a report by The Congressional Research Service. Report No. 84-168A, 784 / 725 titled "Some Constitutional Questions Regarding the Federal Income Tax Laws", dated May 25, 1979 and updated Sept. 26, 1984
"The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above. Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment and indirect taxes were still the subject of the rule of uniformity. Rather, the Court found that the Sixteenth Amendment sought to restrain the Court from viewing an income tax as a direct tax because of its close effect on the underlying property." (pg 5)






http://www.givemeliberty.org/RTP2/PRA/DefensePRADiscoveryDocs.htm

http://www.givemeliberty.org/RTP2/UPDATES/Update2006-06-09.htm

2:02 PM
Fogy411 said...
Well shoot. Posted when I wanted to preview. But at least this gives the eyes a break.

I wanted to include a few more pieces of information for people to study on their own.

There is about to be a historical ruling on the most important clause in the Bill of Rights. Read all about it here:
http://www.wethepeoplefoundation.org/UPDATE/Update2007-01-20.htm

from
www.givemeliberty.org

and http://www.wethepeoplecongress.org/


For proof the IRS is breaking the law regarding the Paperwork Reduction Act (PRA) and the use of the OMB serial numbers on all legal documentaion (specifically how the form 1040 has never been a legal form) go here:
http://www.givemeliberty.org/RTP2/PRA/DefensePRADiscoveryDocs.htm

On that page you will see that, as Steve points out in his own way, the 2006 OMB numbers for the 1040 have also been COPIED to other DISTINCT forms, a clear violation of the PRA. It's the IRS's lame attempt at saying "See? We never were bound by the PRA." Unfortunately for them, they aren't above the law.

The above link is part of this decision:
http://www.givemeliberty.org/RTP2/UPDATES/Update2006-06-09.htm

and
http://givemeliberty.org/RTPLawsuit/Update2005-05-21.htm

Go here to listen to an excellet commentary on the Lawrence 1040 decision!
http://www.americanradioshow.us/archive/AR20060624-2-32K.mp3

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2:25 PM
Steve72 said...
Well, i suppose I should thank fogy for not out-and-out accusing me of being a government shill.

I'm not going to respond to every paragraph in the lengthy post, but I'll point out where I see inaccuracies that I think are important.

If that were true, what then did the government run on for the 150 odd years before the Income Tax was supposedly imposed upon us in 1913?

Well, first of all, there was an income tax prior to 1913. The Constitution (even prior to the Sixteenth Amendment) granted Congress the authority to tax...well, anything. It did divide taxes into "direct" and "indirect" taxes. The legal distinction between the two is that direct taxes must be "apportioned" (or spread evenly across the states).

A case called Pollock ruled that the pre-1913 income tax was a direct tax (it had previously been considered indirect), and therefore was subject to apportionment. The Sixteenth Amendment was implemented to do away with that ruling (it states that an income tax, regardless of what type of tax it is, is not subject to apportionment.) the distinction is no longer material with regard to an income tax.

This will be discussed further momentarily.

It ran on legal excise taxes, etc., as it does today. Remember, schools are paid by property taxes, roads by gas taxes, etc. What is paid by personal Income Taxes? Read The Grace Commission report of 1984: 1/3 = administration and waste, 1/3 goes uncollected and the remaining 1/3 goes to paying off the national debt (Federal Reserve private profit).

I'm not going to argue that the government is an efficient, well oiled machine ('cuz it's not). But the fact that it does not spend your money well does not impact the legality or Constitutionality of the income tax.

I do note with amusement that the Federal Reserve conspiracy is referenced here. I'll write a full blog post on that, but suffice to say that any "profit" (with the exception of a statutory six percent dividend) is property of the U.S. Treasury.

Anybody who does even a little research knows that referring you to page 1 of the tax code and saying there's your proof is not being straight with you. In fact, that's such a lame scarecrow attempt that I'm surprised he threw it in there.

I hardly intended the reference to be "proof". The question I was answering is "where is the law?" The law is the Code. If you want a specific issue addressed, then I can probably do it, but if you ask a broad, global question, you can only get a broad, global asnwer. 26 U.S.C. §1 et. seq. impose the tax.

He then blunders into this statement: "It is a fundamental maxim of statutory construction that later acts trump earlier ones. Prior law which is inconsistent with, and on an equal level of authority with, a new law is implicitly revoked. Whether or not a priro law "followed the 861 argument" is immaterial, because that law is gone."

This was actually in response to a comment on my blog which indicated (without documentation) that the Code in existence in the early 1900s (which has since been dramatically amended) imposed a tax on a much more limited scope of income.

My point is that that, even if tru, it's irrelevant, because the argument is whether the current Code is legal.

What he fails to mention is that for every revision of the tax code it has been explicitly stated by Congress that the scope of the law has not changed significantly. It has only been reworded over time into the legally similar but deceptive version we have today. Another deception.

That's simply not true.

All that hullabaloo that Steve mentions about the ratification of the 16th is irrelevant and a smoke screen. Whether or not it was ratified, it has no effect on us as individuals.

It may not be relevant to the question fogy wants to discuss, but it certainly seemed relevant to Mr. Russo, since he explicitly (and wrongly) stated that the Sixteenth was not adopted properly.

(Lengthy cites omitted)

There it is! The 16th Amendment left the income tax as an indirect excise tax and is to be enforced as such. It is a tax on corporate incomes not requiring the tax to be apportioned!

The fact that the income tax is legall treated as an indirect tax does not impact what it is. the income tax is, for purposes of Congress's plenary and complete taxing power (which existed pre-Sixteenth Amendment) treated as an indirect tax (in that it is not subject to apportionment). However, saying that this legal treatment affectss what the tax is is nonsensical.

Congress can tax incomes, from whatever source derived, without regard to apportionment. The rule of the Pollock case (which said that you could take what was intended to be an indirect tax, and make it direct by "looking through" to the source of income) has been made irrelevant. that is the sole purpose of the Sixteenth.

The argument being made above (and at the links fogy provided) is, essentially, that since the income tax is treated as an indirect tax, it must be an indirect tax, and therefore cannot tax incomes.

This is nonsensical. An analogy would be that since an insane individual is treated as a minor for purposes of the ability to give consent to contract, all insane individuals must be minors. therefore, once a person turns 18, he or she can no longer be insane.

The Amendment changes how the tax is treated. it does not, and cannot, change what it is.

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7:23 AM
The Fool said...
Fogey & Steve It sure is a complex issue to wade through. Thank you both for all of the input for consideration. There certainly doesn't seem to be an easy, uncontestable, and clear answer. Every rebuttal only raises another. The amount of information needed to determine a simple "yes" or "no" answer is astounding. There is definitely a need for clarification and simplification. This is way too much information for the average person to consider. Thank you both for your input.

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2:32 PM
Fogy411 said...
Well, these get very long after awhile. Thank you Fool for accommodating. I’ll try to format it for easiest reading. This indeed is an advanced, but not impossible subject, and the following is most important to us all:

Steve72 said...

Well, i suppose I should thank fogy for not out-and-out accusing me of being a government shill.
If you’re not a shill, perchance you need to bring your “A” game?


I'm not going to respond to every paragraph in the lengthy post,

I venture because you can’t. For example, can you answer as to why the IRS is breaking the law concerning the proper use of OMB registration numbers on “official” tax forms like the 1040, as referenced in my post above? Is the 1040 still merely a “proposed” form, submitted by the IRS under regulation 5 CFR 1320.9, the regulation for PROPOSED forms, as opposed to IRS Form 1040-NR (for Non-Resident Aliens) which is certified as complying with the requirements of the PRA found at regulation 5 CFR 1320.8, which requires the specific cites of the CFR that supports its authority.

The form used for the 1040-NR request is OMB Form “83” as seen below:

"See the actual OMB Form 83 the IRS submitted here"

On line 5 of Form 83, the administrative requester is required to cite the statutes actually authorizing the collection of the information. The authorizing statutes are, in fact, cited. On line 27 of Form 83, the administrative requester is required to cite the regulations actually authorizing the collection of the information. The authorizing regulations are, in fact, cited.

No such cites for the 1040:

"See the actual OMB Form 83-1 the IRS submitted here"

OMB Form 83-1 does NOT require any specific citation of statutory authority. OMB Form 83-1 does NOT require any specific citation of regulatory authority. If there is no form 83 request by the IRS this would indicate that the IRS form 1040 is not yet a legal document, yet it is masqueraded as such by the IRS.

If you can show a current submission of the 1040 by the IRS to the PRA using form 83, NOT form 83-1 (proposed), I would stand corrected.
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Fogy411-
If that were true, what then did the government run on for the 150 odd years before the Income Tax was supposedly imposed upon us in 1913?

Steve72
1) Well, first of all, there was an income tax prior to 1913. 2)The Constitution (even prior to the Sixteenth Amendment) granted Congress the authority to tax...well, anything. 3) It did divide taxes into "direct" and "indirect" taxes. The legal distinction between the two is that direct taxes must be "apportioned" (or spread evenly across the states).

Fogy411
This is wrong on so many levels. Observe, folks, how they practice to deceive.

1) Strawman. Indeed there was an income tax imposed upon corporate income, as there always was. Creating a corporation is a privilege granted by statute, and as such is subject to excise taxes fair and square. The implication made here was that there was always a personal income tax as you think of it today, which there wasn’t. Why, whatever might they need the 16th Amendment for if there was already a personal tax on labor? So which is it going to be; We were paying for the government services with personal income tax before the 16th “allows” it, or the government is not funded by personal income tax revenue, as the Grace Commission and the Treasury reports declare?

2) Total dodge of the question, and a deceptive and incorrect strawman. If the Constitution allowed Congress to tax anything then they could tax you crossing the street. And if they didn’t want you crossing the street they could simply pass a $1million tax for the “privilege”. The Supreme Court and common sense says that is not possible. 3) The actual text of the Constitution is as follows:


• Article 1; Section 2, Clause 3:
"Representations and direct taxes shall be apportioned among the several states which may be included within this union, according to their respective numbers..."

• Article 1; Section 9, Clause 4:
"No Capitation, or other direct tax, shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."

• Apportionment: means to equally divide among the population (census). (like: $1 per person for every person)

• Capitation Tax: "a tax imposed upon a person at a fixed rate, regardless of the taxpayer's ability to pay, occupation, assets, or income." (Law Dictionary) (The "Graduated income tax" is capitation and is NOT Constitutional!)


So, to be apportioned doesn’t mean spread evenly across the states, it means equally divided according to the whole population, a huge difference. And, if you notice, the emphasis on not taxing us directly without it being specifically apportioned according to the population is so important to the drafters of the Constitution it appears twice!

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Steve72
1) A case called Pollock ruled that the pre-1913 income tax was a direct tax (it had previously been considered indirect), and therefore was subject to apportionment. The Sixteenth Amendment was implemented to do away with that ruling 2) (it states that an income tax, regardless of what type of tax it is, is not subject to apportionment.) the distinction is no longer material with regard to an income tax.


Fogy411
1) Wrong. The only thing Pollock did was take a tax on income derived from property and classify it, erroneously, as a direct tax. That's it. It had nothing to do with personal income derived from labor, but instead it dealt with income derived from existing wealth (corporate owned land in this case). Income derived from our inalienable right as free beings to labor to survive is not taxable. Such a tax would be feudalism, or slavery, depending on the percent confiscated. That is happening in America, but it is not Constitutional.

2) For someone who “studied” law, you either forget or discount the truth that the scope of the Amendment is not found in it’s common language wording, but in the legal definitions, historical context and derivative legal authority that defines the amendment. You also discount the 9 Supreme Court cases and official reports that repeatedly and uncontestedly find that the 16th conferred no new powers of taxation. The sole issue of the 16th was to keep any court from doing what Pollock did; trick the system. The purpose of the 16th Amendment was to keep any court from reclassifying an income tax as direct when it is not direct. The proof of this is found in STANTON v. BALTIC MINING CO, 240 U.S. 103 (1916):

But, aside from the obvious error of the proposition, intrinsically considered, it manifestly disregards the fact that by the previous ruling it was settled that the provisions of THE 16TH AMENDMENT CONFERRED NO NEW POWER OF TAXATION, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being TAKEN OUT OF THE CATEGORY OF INDIRECT TAXATION TO WHICH IT INHERENTLY BELONGED, AND BEING PLACED IN THE CATEGORY OF DIRECT TAXATION SUBJECT TO APPORTIONMENT by a consideration of the sources from which the income was derived,-that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed.

If it wasn’t taxable before 1913, it wasn’t taxable after 1913. Period. Congress did not have [and still does not have] the power to lay a direct tax that disregards the rule of apportionment.

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Fogy411
It ran on legal excise taxes, etc., as it does today. Remember, schools are paid by property taxes, roads by gas taxes, etc. What is paid by personal Income Taxes? Read The Grace Commission report of 1984: 1/3 = administration and waste, 1/3 goes uncollected and the remaining 1/3 goes to paying off the national debt (Federal Reserve private profit).

Steve72
I'm not going to argue that the government is an efficient, well oiled machine ('cuz it's not). But the fact that it does not spend your money well does not impact the legality or Constitutionality of the income tax.

Fogy411
My above quote is not directed at the legality of the tax, but to the fallacious myth that the personal income tax as we commonly think of it pays for and is what is referenced as paying for “taxpayer services” and “your tax dollars at work”. Instead it can be shown that 100% of the personal income tax revenue is gone before one cent is spent on running the government. I’ll show that if requested, but this is getting long again.

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Steve72
I do note with amusement that the Federal Reserve conspiracy is referenced here. I'll write a full blog post on that, but suffice to say that any "profit" (with the exception of a statutory six percent dividend) is property of the U.S. Treasury.

Fogy411
It doesn’t suffice to say that unless you also say that the Treasury is then obligated to use that profit money to pay back the US Debt to the Federal Reserve in the form of supplementing the Gold Reserve held as collateral by the Feds, or by directly paying down the US Treasury bond debt owed to the Federal Reserve (your six percent dividend) for the privilege of printing our money.

(b) The net earnings derived by the United States from Federal reserve banks shall, in the discretion of the Secretary, be used to SUPPLEMENT THE GOLD RESERVE held against outstanding United States notes, or shall be applied to the REDUCTION OF THE OUTSTANDING BONDED INDEBTEDNESS of the United States under regulations to be prescribed by the Secretary of the Treasury. Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, and the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied.
[12 USC 290. Part of original Federal Reserve Act; not amended. Designated subsection (b) by act of Aug. 10, 1993 (107 Stat. 337).]

Address that in your blog post!

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Fogy411
Anybody who does even a little research knows that referring you to page 1 of the tax code and saying there's your proof is not being straight with you. In fact, that's such a lame scarecrow attempt that I'm surprised he threw it in there.


Steve72
I hardly intended the reference to be "proof". The question I was answering is "where is the law?" The law is the Code. If you want a specific issue addressed, then I can probably do it, but if you ask a broad, global question, you can only get a broad, global asnwer. 26 U.S.C. §1 et. seq. impose the tax.


Fogy411
You know darn well that the mere imposition of a tax does not create a liability. You also know darn well the question means show us the exact statute that creates the liability. For instance, here’s the exact statute that creates liability for Non Resident Aliens and Foreign Corporations:


TITLE 26 > Subtitle A > CHAPTER 3 > Subchapter B > § 1461

§ 1461. Liability for withheld tax

Every person required to deduct and withhold any tax under this chapter is HEREBY MADE LIABLE for such tax and is hereby indemnified against the claims and demands of any person for the amount of any payments made in accordance with the provisions of this chapter.


Please then show me the law, the EXACT statute that creates THE LIABILITY for the average person earning a living working domestically in America. There are hundreds of thousands of dollars in rewards currently available for ANYONE to provide such a statute. But they can’t, because it doesn’t exist.

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The substantial meaning of the law changing or not changing from revision to revision must be deferred as I dig up the proofs.
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Steve72
(Lengthy cites omitted)

Fogy411
There it is! The 16th Amendment left the income tax as an indirect excise tax and is to be enforced as such. It is a tax on corporate incomes not requiring the tax to be apportioned!

Steve72
The fact that the income tax is legall treated as an indirect tax does not impact what it is. the income tax is, for purposes of 1) Congress's plenary and complete taxing power (which existed pre-Sixteenth Amendment) treated as an indirect tax (in that it is not subject to apportionment). 2) However, saying that this legal treatment affectss what the tax is is nonsensical.


Fogy411
1) reductio ad absurdum - Disproof of a proposition by showing the absurdity of its inevitable conclusion. As I said above, the Supreme Court has ruled, and common sense dictates, that Congress does not have complete taxation power, as “the power to tax is the power to destroy”. Remember the quote from above?:

… THE 16TH AMENDMENT CONFERRED NO NEW POWER OF TAXATION, BUT SIMPLY PROHIBITED THE PREVIOUS COMPLETE AND PLENARY POWER OF INCOME TAXATION POSSESSED BY CONGRESS FROM THE BEGINNING FROM BEING TAKEN OUT OF THE CATEGORY OF INDIRECT TAXATION TO WHICH IT INHERENTLY BELONGED, AND BEING PLACED IN THE CATEGORY OF DIRECT TAXATION SUBJECT TO APPORTIONMENT …

The phrase “Congress’ plenary and complete taxing power” refers strictly to its power to lay indirect taxes, or the unlimited power to tax consumption and privileges, which we can avoid. Having unlimited power to tax us directly, without our ability to avoid it, and without dividing that direct tax equally and fairly amongst every Citizen, is absurd and tyrannical. Congress could tax persons of one political party or in one geographical area into utter submission. Void.



Steve72
1) The argument being made above (and at the links fogy provided) is, essentially, that since the income tax is treated as an indirect tax, it must be an indirect tax, and therefore cannot tax incomes.

This is nonsensical. An analogy would be that since an insane individual is treated as a minor for purposes of the ability to give consent to contract, all insane individuals must be minors. therefore, once a person turns 18, he or she can no longer be insane.

2) The Amendment changes how the tax is treated. it does not, and cannot, change what it is.



Fogy411
1) If that’s the argument you are getting out of the Supreme Court cases, I’ll have to try again. First, it is indeed absurd to postulate that a circular reference such as the one you state is the end result of several Supreme Court decisions. There is no such anomaly. As you’ll see below the issue is quite well defined.

2) Not exactly. The amendment is not so broad stroked as to have an affect on every possible instance of income tax. (That can be imagined intuitively, as we know it is absurd to think that Congress can have complete taxing authority over us, like a king over his subjects. They can only tax privileges granted under their authority, and us working to survive is not a privilege but a right.)

In Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), the court finds that there is much confusion arising from the Pollock case:

“…We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion* that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, ALTHOUGH DIRECT, SHOULD NOT BE SUBJECT TO THE REGULATION OF APPORTIONMENT APPLICABLE TO ALL OTHER DIRECT TAXES.

And the far-reaching effect of *THIS ERRONEOUS ASSUMPTION will be made clear by generalizing the many contentions advanced in argument to support it, as follows:

(a) The Amendment authorizes ONLY A PARTICULAR CHARACTER OF DIRECT TAX without apportionment, and therefore if a tax is levied under its assumed authority which does not partake of the characteristics exacted by the Amendment, it is outside of the Amendment, and is void as a direct tax in the general constitutional sense because not apportioned.”

(Note the following huge statement, the 16th clearly did not explicitly repeal any clause of the Constitution, giving rise to the following conundrum)

“But it clearly results that the proposition [The "erroneous assumption” above] and the contentions under it, if acceded to, WOULD CAUSE ONE PROVISION OF THE CONSTITUTION TO DESTROY ANOTHER; that is, they WOULD RESULT IN BRINGING THE PROVISIONS OF THE AMENDMENT exempting a direct tax from apportionment INTO IRRECONCILABLE CONFLICT WITH THE GENERAL REQUIREMENT that all direct taxes be apportioned.

Moreover, the tax authorized by the Amendment, being direct, would not come under the rule of uniformity applicable under the Constitution to other than direct taxes, and thus it would come to pass that the result of the Amendment would be to authorize a particular direct tax not subject either to apportionment or to the rule of geographical uniformity, thus giving power to impose a different tax in one state or states than was levied in another state or states.

THIS RESULT, instead of simplifying the situation and making clear the limitations on the taxing power, which obviously the Amendment must have been intended to accomplish, WOULD CREATE RADICAL AND DESTRUCTIVE CHANGES IN OUR CONSTITUTIONAL SYSTEM AND MULTIPLY CONFUSION.

Moreover, in addition, the conclusion reached IN THE POLLOCK CASE DID NOT IN ANY DEGREE INVOLVE HOLDING THAT INCOME TAXES GENERICALLY AND NECESSARILY CAME WITHIN THE CLASS OF DIRECT TAXES ON PROPERTY, but, on the contrary, recognized the fact THAT TAXATION ON INCOME WAS IN ITS NATURE AN EXCISE entitled to be enforced as such UNLESS AND UNTIL it was concluded that to enforce it would amount to accomplishing the result WHICH THE REQUIREMENT AS TO APPORTIONMENT OF DIRECT TAXATION WAS ADOPTED TO PREVENT (I.E.- OUR ENSLAVEMENT), in which case the duty would arise to disregard form and consider substance alone, AND HENCE SUBJECT THE TAX TO THE REGULATION AS TO APPORTIONMENT WHICH OTHERWISE AS AN EXCISE WOULD NOT APPLY TO IT.”

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Conclusion:

The rule of apportionment on direct taxes is alive and well. All income taxes are indirect excise taxes until such time as they have the effect of a direct tax, at which time they are subject to apportionment.

Checkmate.

This decision has not been repealed or otherwise made invalid and stands to this day. The current income tax system has the effect of a direct tax (you are punished for not paying) and is not following the rule of apportionment (you pay more or less tax dollars than your neighbor).

There is no statute specifically making you liable for the income tax, but there are specific statutes for foreign workers. That’s because foreign workers are working under the privilege of a federally negotiated trade treaty, and as such their income is taxable by statute. Our income derived from our personal labor is our inalienable right as free Citizens.

The income tax, as you know it, is a massive fraud. Qui bono? The Federal Reserve Corporation. But that’s another story.

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7:56 PM
The Fool said...
Fogy: It's an easy thing to oblige. It's unfortunately that a debate of such import is only taking place in the back lots of comment sections. This is a debate that should take place on television, in front of the American people, and then let the people decide.

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8:58 AM
Steve72 said...
Long post warning. I have provided links at several points in this post. I tried to use (a href=”link”)words(/a) for html (brackets instead of parantheses). That didn't work, so I posted them as plain text.

If someone wants to correct my html difficulties in the meantime, I'd love to know what I did wrong.

On to the rebuttal of the rebuttal of the rebuttal of the rebuttal.

If you’re not a shill, perchance you need to bring your “A” game?
A small note: beginning an argument by insulting the person with whom you are arguing is rarely a sign that you are winning.

I venture because you can’t. For example, can you answer as to why the IRS is breaking the law concerning the proper use of OMB registration numbers on “official” tax forms like the 1040, as referenced in my post above? Is the 1040 still merely a “proposed” form, submitted by the IRS under regulation 5 CFR 1320.9, the regulation for PROPOSED forms, as opposed to IRS Form 1040-NR (for Non-Resident Aliens) which is certified as complying with the requirements of the PRA found at regulation 5 CFR 1320.8, which requires the specific cites of the CFR that supports its authority.
I could, but why bother when the courts have already addressed (and dismissed) it?
The Form 1040 does display an OMB number. It’s on the upper right hand corner. materials distributed with the 1040 do not display an OMB number, because they are not required to do so (U.S. v. Holden, 8th Cir. 1992).
If that weren’t enough, courts have also noted that because the IRS’ information collection power is statutory, not regulatory (i.e., it comes from an act of Congress… Section 6012(a) of the Internal Revenue Code (here: http://www.fourmilab.ch/ustax/www/t26-F-61-A-II-B-6012.html) …and not an agency regulation), the requirements (and limitations) of the PRA do not even apply (U.S. v. Neff, 11th Cir. 1992).

In fact, the argument has been addressed, and dismissed, in ever case it was brought from 1990 through 2006.

Tax protestors note (with glee) a recent individual (Robert Lawrence) who had criminal charges dismissed by the prosecution after bringing this defense. However, that was not a decision on the merits. The IRS counsel was unprepared for the argument (which was presented five days before trial), and was unable to prepare in time for trial (he attempted to gain a continuance, but was denied). Superior trial tactics by the defense counsel, but far…FAAAAAAR from a ruling in his favor (particularly when contrasted with the multiple court rulings specifically and explicitly dismissing the same argument.)

(Citations and links omitted for space)

OMB Form 83-1 does NOT require any specific citation of statutory authority. OMB Form 83-1 does NOT require any specific citation of regulatory authority. If there is no form 83 request by the IRS this would indicate that the IRS form 1040 is not yet a legal document, yet it is masqueraded as such by the IRS.

If you can show a current submission of the 1040 by the IRS to the PRA using form 83, NOT form 83-1 (proposed), I would stand corrected.

First, it’s actually the 83-I (letter), not 83-1 (number).

The IRS submitted the request for the 1040 on an 83-I because, as indicated in the title of the form, the 83-I is used for any submission of a form which has been changed since the last submission.

The instructions to the 83-I are at this link (as a pdf). Scroll to page 3, and look at paragraph 2(a). The form 83-I can be used for forms “which have previously been issued an OMB control number” (like the 1040) if there has been a change in the form.

As you probably noted on my blog, I provided a link for the IRS’ most recent submission (on the 83-I), but I’ll include it here for completeness: here. Scroll to page 3, and look at the checked box in 3(b) “revision of a currently approved collection”. Since there has been a change, the form cannot be filed on the 83, and must be filed on the 83-I. This has no bearing on whether the form is “currently legal”, it just indicates that the form is different than the prior filing.

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1) Strawman. Indeed there was an income tax imposed upon corporate income, as there always was. Creating a corporation is a privilege granted by statute, and as such is subject to excise taxes fair and square. The implication made here was that there was always a personal income tax as you think of it today, which there wasn’t…
False. The Revenue Act of 1862 (enacted briefly to help pay for the Civil War) was the first pure income tax. It imposed a 3% tax on “…annual income of every person residing in the U.S. whether derived from any kind of property, or from any professional trade, employment, or vocation carried on in the United States or elsewhere, or from any source whatever…”. not from corporate business. It also imposed a higher tax on individuals residing outside the U.S. (which, I presume, is where the 861 argument gets its historical genesis), but the tax itself was on all incomes.

…Why, whatever might they need the 16th Amendment for if there was already a personal tax on labor? So which is it going to be; We were paying for the government services with personal income tax before the 16th “allows” it, or the government is not funded by personal income tax revenue, as the Grace Commission and the Treasury reports declare?

The Supreme Court upheld the Revenue Act of 1861. the law itself was repealed a short time later (in 1872). If you want to say that tax should be Unconstitutional as applied under the terms of the subsequently decided case of Pollock, I suppose you could be right (if there were sources of income that could result in direct taxation). But that’s immaterial, because that ruling came well after the law itself disappeared

2) Total dodge of the question, and a deceptive and incorrect strawman. If the Constitution allowed Congress to tax anything then they could tax you crossing the street.

They certainly could tax you crossing the street (unless, for example, such a tax was ruled to violate a specific right). I am not a great writer, so I think I’ll defer to the Supreme Court to expound on this point: “…the authority conferred upon Congress by 8 of article 1 'to lay and collect taxes, duties, imposts and excises' is exhaustive and embraces every conceivable power of taxation”

And if they didn’t want you crossing the street they could simply pass a $1million tax for the “privilege”. The Supreme Court and common sense says that is not possible.

They could do that as well (again, unless it was ruled to violate a right). Congressional authority is limited in two ways: Powers (meaning what Congress can do) and Rights (meaning areas in which Congress cannot exercise its power, even if one exists). The only restriction on Congresses taxing authority is that Indirect taxes need to be uniform and direct taxes need to be apportioned. With extremely limited exceptions, there is no limit on the power of taxation…i.e., what can be made subject to a tax. (For purposes of completeness, I’ll note that there is some restriction on Congressional power to tax to the extent it would affect state sovereignty, e.g., exports from states (specifically excluded by the Constitution) or wages of state employees (although that restriction has been significantly limited)).

Common sense says it’s not possible because any Congressman who voted for such a tax would have a very short political career. If you believe the Supreme Court has ever ruled that such a tax is outside Congress’s power, I’d be very interested in seeing the cite.

3) The actual text of the Constitution is as follows:

(Cites omitted for space)

So, to be apportioned doesn’t mean spread evenly across the states, it means equally divided according to the whole population, a huge difference. And, if you notice, the emphasis on not taxing us directly without it being specifically apportioned according to the population is so important to the drafters of the Constitution it appears twice!

This is not correct. The “spread evenly among the states” parenthetical in my post above was misleading (unintentionally). It should read “spread evenly among the states according to their population. However, apportionment does not mean that each individual pays an equal amount of tax. it means that each state pays an appropriate amount of tax, according to its population.

Remember that the Founders were, if anything, more concerned with the interaction between states and the Federal government than they were with the interaction between individuals and the Federal government.

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1) Wrong. The only thing Pollock did was take a tax on income derived from property and classify it, erroneously, as a direct tax. That's it. It had nothing to do with personal income derived from labor, but instead it dealt with income derived from existing wealth (corporate owned land in this case). Income derived from our inalienable right as free beings to labor to survive is not taxable. Such a tax would be feudalism, or slavery, depending on the percent confiscated. That is happening in America, but it is not Constitutional.

Actually, everything I posted above is correct. Pollock took an income tax (which had been considered inherently indirect) and, by looking through to the source of the income (which, as you point out, was property in this case), classified it as direct and therefore void (for want of apportionment). Whether the Pollock case dealt with a “tax on personal income derived from labor” isn’t really material to the discussion (particularly since, after the Sixteenth Amendment, the Pollock case is irrelevant).

However, to address your specific point, note that the tax disputed in Pollock, in addition to taxing income from property, stated that “… a tax of 2 per cent. shall be assessed, levied, and collected, and paid annually upon the gains, profits, and income received in the preceding calendar year by every citizen of the United States, whether said gains, profits, or income be derived from any kind of property, rents, interest, dividends, or salaries, or from any profession, trade, employment, or vocation carried on within the United States or elsewhere, or from any source whatever” Pollock considered the taxation of income from employment problematic only to the extent it resulted in the taxation of state employees (specifically judges). A tax on wages is inherently indirect.

2) For someone who “studied” law, you either forget or discount the truth that the scope of the Amendment is not found in it’s common language wording, but in the legal definitions, historical context and derivative legal authority that defines the amendment. You also discount the 9 Supreme Court cases and official reports that repeatedly and uncontestedly find that the 16th conferred no new powers of taxation.

The sole issue of the 16th was to keep any court from doing what Pollock did; trick the system. The purpose of the 16th Amendment was to keep any court from reclassifying an income tax as direct when it is not direct. The proof of this is found in STANTON v. BALTIC MINING CO, 240 U.S. 103 (1916):

But, aside from the obvious error of the proposition, intrinsically considered, it manifestly disregards the fact that by the previous ruling it was settled that the provisions of THE 16TH AMENDMENT CONFERRED NO NEW POWER OF TAXATION, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being TAKEN OUT OF THE CATEGORY OF INDIRECT TAXATION TO WHICH IT INHERENTLY BELONGED, AND BEING PLACED IN THE CATEGORY OF DIRECT TAXATION SUBJECT TO APPORTIONMENT by a consideration of the sources from which the income was derived,-that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed

Au contraire. The “no new powers of taxation” issue is inherent in my discussions above (and, ironically, discounted by you in your rebuttals.) that language comes originally from the Stanton case you cite. However, note the context in which it is discussed (I’ll bold the relevant passage in the same quote): the Sixteenth Amendment conferred no new power of taxation but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged…” Also note that the area criticized is “… testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed.” A tax on income is inherently indirect. It is only by looking through the tax to the source (as Pollock did) that it can be considered direct. Once that “trick” was eliminated, income taxes, from whatever source derived, are deemed indirect.

Congress’s power of income taxation is, and was, “complete and plenary”. Congress could tax incomes prior to the 16th amendment. If the income tax was indirect, it could be taxed without apportionment (subject to the rule of uniformity). If it was direct, it was subject to apportionment. The Pollock case ruled that a particular income tax was void…not because Congress could not tax incomes, but because viewing the source of the income caused the tax on incomes derived from that source to become direct. The Sixteenth Amendment eliminates the analysis of viewing the source of the income (which you call “tricking the system”).

A tax on income does not require apportionment regardless of the source. Or, to put it another way, “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.”

If it wasn’t taxable before 1913, it wasn’t taxable after 1913. Period. Congress did not have [and still does not have] the power to lay a direct tax that disregards the rule of apportionment.

I suppose the statement “if it wasn’t taxable then, it’s not taxable now” is technically correct (since Congress’ power to tax incomes is, and always has been, “complete and plenary”). However, that entire analysis is immaterial. Pollock and Brushaber both indicated that income derived from professions, trades, employment, vocations, etc. were considered indirect taxes. In fact, the Pollock ruling struck down the entire income tax as Unconstitutional (in part) because such taxes were Constitutional even after the “source’ analysis. Striking only the “property income’ tax at question in Pollock would have resulted on the tax on incomes from professions, trades, employment and vocations being the sole Constitutional income tax, and therefore would bear the burden of the full force of Congress’ taxing authority.

In short, even if the Amendment, by its very terms and by the words of the courts in question, did not remove the consideration of apportionment form an income tax, the tax on incomes from your labor would nonetheless be considered indirect.
Making the statement that a “tax on personal labor” is not authorized by the Sixteenth disregards the Sixteenth itself, as well as the fact that even under the pre-Sixteenth analysis, a Pollock-like review of the underlying source would not result in the striking of the tax.

None of that is material, however, since the Sixteenth removes the consideration from income tax. Income taxes are not subject to apportionment.

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My above quote is not directed at the legality of the tax, but to the fallacious myth that the personal income tax as we commonly think of it pays for and is what is referenced as paying for “taxpayer services” and “your tax dollars at work”. Instead it can be shown that 100% of the personal income tax revenue is gone before one cent is spent on running the government. I’ll show that if requested, but this is getting long again.

My point was really that I had no interest in engaging in a debate regarding whether the income tax is a good thing, or necessary. I’m only disputing the legal claims. The arguments in the above paragraph are policy rather than law, and I think they’re arguably valid.

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It doesn’t suffice to say that unless you also say that the Treasury is then obligated to use that profit money to pay back the US Debt to the Federal Reserve in the form of supplementing the Gold Reserve held as collateral by the Feds, or by directly paying down the US Treasury bond debt owed to the Federal Reserve (your six percent dividend) for the privilege of printing our money.

The Federal Reserve is cost-neutral to the government. the only amounts kept by the Fed itself are actual expenses (salaries, etc.) if Congress performed these functions itself, it would pay those expenses itself.

The six percent dividend is paid on monies retained as fractional reserves within the Federal Reserve System, and is paid to member banks.

(Cite omitted for space)

Address that in your blog post!

I’ll address it right here, if you please.

The “bonded indebtedness” is not solely Federal Reserve debt. Bonds are obligations…debt…of the Treasury. Anyone can buy them.

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You know darn well that the mere imposition of a tax does not create a liability. You also know darn well the question means show us the exact statute that creates the liability. For instance, here’s the exact statute that creates liability for Non Resident Aliens and Foreign Corporations:

If a tax has been imposed on you, you are liable to pay the tax. “I know darn well” that I am liable to pay a debt which is imposed on me by statute.

(Cite omitted)

Please then show me the law, the EXACT statute that creates THE LIABILITY for the average person earning a living working domestically in America. There are hundreds of thousands of dollars in rewards currently available for ANYONE to provide such a statute. But they can’t, because it doesn’t exist.

26 U.S.C. Section 1. that’s it. That section imposes the tax on your average person. You are liable to pay that tax. there’s no other way to read it.

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The substantial meaning of the law changing or not changing from revision to revision must be deferred as I dig up the proofs.

Okie-dokie.
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1) reductio ad absurdum - Disproof of a proposition by showing the absurdity of its inevitable conclusion. As I said above, the Supreme Court has ruled, and common sense dictates, that Congress does not have complete taxation power, as “the power to tax is the power to destroy”.


That quote is, in fact, from McCullogh v. Maryland, which decided as a matter of Federal supremacy that a STATE could not tax a Federal bank. It has utterly nothing to do with the Federal Congress’s complete and plenary income tax power.

As to your argument that Congress’ taxing power is not complete, I point you again to Brushaber: “that the authority conferred upon Congress by 8 of article 1 'to lay and collect taxes, duties, imposts and excises' is exhaustive and embraces every conceivable power of taxation has never been questioned, or, if it has, has been so often authoritatively declared as to render it necessary only to state the doctrine.”

You can’t start an argument from a fallacious premise and expect to get anywhere.

Remember the quote from above? The phrase “Congress’ plenary and complete taxing power” refers strictly to its power to lay indirect taxes, or the unlimited power to tax consumption and privileges, which we can avoid. Having unlimited power to tax us directly, without our ability to avoid it, and without dividing that direct tax equally and fairly amongst every Citizen, is absurd and tyrannical. Congress could tax persons of one political party or in one geographical area into utter submission. Void.


You kinda missed the whole “uniformity” requirement of indirect taxes there, didn’cha?

“Congress’s complete and plenary income taxing power” refers to Congress’ power, in Article I, Section 8, to impose taxes. It is not distinguishing between direct and indirect in that quote…it is only saying that Congress can, and always could, tax incomes.

1) If that’s the argument you are getting out of the Supreme Court cases, I’ll have to try again. First, it is indeed absurd to postulate that a circular reference such as the one you state is the end result of several Supreme Court decisions. There is no such anomaly. As you’ll see below the issue is quite well defined.


It’s not the argument I’m getting from the Supreme Court cases. It is the very crux of the argument presented by the individuals who assert that the income tax is impossible under the Sixteenth.

2) Not exactly. The amendment is not so broad stroked as to have an affect on every possible instance of income tax. (That can be imagined intuitively, as we know it is absurd to think that Congress can have complete taxing authority over us, like a king over his subjects. They can only tax privileges granted under their authority, and us working to survive is not a privilege but a right.)


This is inaccurate. To grant a legislative body a power in a Republic, with a system of checks and balances such as ours is far short of being a “king”.

Congress has a complete taxing power, subject to very limited restrictions. The principal limit on the power is the ability of the people to vote out legislators who approve unpopular taxes.

Or, as Brushaber itself stated, “that the authority conferred upon Congress by 8 of article 1 'to lay and collect taxes, duties, imposts and excises' is exhaustive and embraces every conceivable power of taxation has never been questioned, or, if it has, has been so often authoritatively declared as to render it necessary only to state the doctrine.”

In Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), the court finds that there is much confusion arising from the Pollock case:

(Lengthy citation omitted)

Conclusion:

The rule of apportionment on direct taxes is alive and well. All income taxes are indirect excise taxes until such time as they have the effect of a direct tax, at which time they are subject to apportionment.

Checkmate.


You do realize that it’s a foul to declare checkmate when none exists, right?

Again, even if that is true, the only court case to in any way determine that a tax on incomes was direct was Pollock (which has been done away with), and even in that case itself, it was determined that a tax on incomes arising from labor was itself indirect.

This decision has not been repealed or otherwise made invalid and stands to this day. The current income tax system has the effect of a direct tax (you are punished for not paying) and is not following the rule of apportionment (you pay more or less tax dollars than your neighbor).


Even if your reading is true (and subsequent cases have explicitly disputed that reading of Brushaber…for an example, see U.S. v. Collins, 10th cir, 1990 (the Supreme Court declined to review this case), which stated that the Sixteenth Amendment “authorizes a direct nonapportioned tax upon United States citizens throughout the nation”), it still doesn’t get you anywhere. The distinction between direct and indirect tax does not turn on whether you can avoid it. A direct tax is a tax on property by virtue of ownership of the property. An indirect tax is a tax on an event…on earning income, for example (as determined in Pollock).

There is no statute specifically making you liable for the income tax, but there are specific statutes for foreign workers. That’s because foreign workers are working under the privilege of a federally negotiated trade treaty, and as such their income is taxable by statute. Our income derived from our personal labor is our inalienable right as free Citizens.


I assume you mean other than 26 U.S.C. Section 1, which imposes a tax on taxable income of all U.S. citizens. Your income derived from personal labor is subject to Congress’ “exhaustive” power to impose taxes. It is not subject to apportionment because it is, by nature, an indirect tax and, even if it could be made direct through some analysis, would be exempted from that requirement by the terms of the Sixteenth Amendment.

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1:26 PM
Fogy411 said...
So many rebuttals, so little time. I'll be back tomorrow.

In the meantime, you didn't address point one. The issue isn't whether the 1040 has an OMB, as clearly it does, the issue is why are they illegally using that OMB on the several other forms noted in my previous posts?

And the notion that the IRS is immune from the PRA is ridiculous. But we know they're trying to pull out all the stops to claim they aren't. The internal administrative regulations of the IRS are irrelevant.

And another quickie; If the 83-i (thank you) was a change submission (out of common courtesey 'cause they don't have to follow the PRA?!) then where is the original submission on 83?

The rest will have to wait until after my date.

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4:16 PM
Fogy411 said...
Well, maybe one more. If the IRS was simply surprised by the Lawrence defence, why did they dismiss the case WITH PREDUDICE, never to be retried?! Five days is plenty of time for the experts to find the proof that the 1040 was a valid form and negate the PRA as a total defense defense.

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4:39 PM

In the meantime, you didn't address point one. The issue isn't whether the 1040 has an OMB, as clearly it does, the issue is why are they illegally using that OMB on the several other forms noted in my previous posts?


Look at your own link. The "other forms" that the OMB number is used on are not distinct forms...they are versions of the same form. The application, Page 4, item 8, explicitly asks for the form number(s), and the additional forms are entered there.

For a discussion of the permissibility of this, scroll to page 14 of the application, and read item 15. An agency may use a single number for multiple forms, if they are part of the same "information collection".

And the notion that the IRS is immune from the PRA is ridiculous. But we know they're trying to pull out all the stops to claim they aren't. The internal administrative regulations of the IRS are irrelevant.


The court ruling which said that the IRS is not subject to the PRA had utterly nothing to do with the "internal admistrative regulations" of the IRS. It stated that, because the collection of information was specifically required by Congress, and the PRA was not intended to offset any prior Congressional acts, the PRA was inapplicable. If the IRS had collected information as part of it's general regulatory authority (as an executive agency), it would be subject. However, since the information collection here is by mandate of Congress, the PRA does not apply. Again, that is one court's determination. Others have obliquely addressed the issue, but not reached it (because they found that the 1040 complied with the PRA)

And another quickie; If the 83-i (thank you) was a change submission (out of common courtesey 'cause they don't have to follow the PRA?!) then where is the original submission on 83?


I think it will be difficult to find an online source for a document which was likely drafted in 1980.

The OMB number was issued, and has been renewed by the Office of Management and Budget. They seem to think the renewal was appropriate. I kind of think the burden is on you to show that that number is fallacious.

Well, maybe one more. If the IRS was simply surprised by the Lawrence defence, why did they dismiss the case WITH PREDUDICE, never to be retried?! Five days is plenty of time for the experts to find the proof that the 1040 was a valid form and negate the PRA as a total defense defense.


I am very, very glad you asked this, because it allows me to clarify something I said above.

The case here was the criminal proceding. Lawrence had already lost in civil procedings (meaning he has to pay all of the back taxes). This case was just to decide if he went to jail (and paid the taxes) or went home (and paid the taxes). In order to prove criminal liability, the government needs to show that he intended to defraud the government. If he can show (or, more accurately, if the government can't disprove) a legitimate misunderstanding of the law, then there's no criminal liability.

The government was not prepared to show that Lawrence did not misunderstand the issue, because they were unaware that that was at issue in the case.

Again: In this case which is cited as a victory for the tax protest movement, the defendant paid the tax. Just like Janice Kuglin.

As for why it was dismissed "with prejudice", that, I would assume, is because jeopardy had attached.

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6:14 PM
Steve72 said...
Ah.

I just read a couple things on the case. The government was not unprepared to address the PRA defense. However, they apparently needed to amend the complaint dramatically because the IRS agent had made a rather dramatic math error in calculating the taxes owed (which would have affected the criminal charges). The judge denied the ability to completely reformulate the charges, and the govrnment moved to dismiss.

So, not superior trial tactics on the part of the defense so much as incompetent preparation on the part of the prosecution. Still not even close to a validation of the PRA defense.

(Also, I want to reiterate that he lost on the question of whether he needs to pay the taxes.)

America: From Freedom to Fascism (part 1)

Rebuttal / debunked:

I finally watched Aaron Russo's movie "America: From Freedom to Fascism". My understanding is that there are several versions of this movie floating around. The one I watched is labeled the "Authorized director's cut", and contains a "last minute" addition of a Lou Dobbs report on the Security and Prosperity Partnership (discussed infra).

This rebuttal will focus primarily on the tax issues because (a) they are the major portion of the movie and (b) it's the area I'm most interested in. I'll include a good bit on the Federal Reserve issues as well, but most of that has been discussed in prior threads.

The PATRIOT ACT issues are not fully explicated in the movie, but are more asserted as evidence of a generally sinister government. I have my own issues with certain aspects of the PATRIOT ACT, but, as there are no specific issues raised in the movie, I don't think it appropriate to raise them here.

There is also some discussion of the REAL ID Act. This discussion, I think, is valuable. Again, I have issues with this particular act beyond what Russo discusses, but I won't raise those issues here.

Finally, in a full disclosure, some of this analysis is lifted or adapted from things I have written previously, primarily on this site. So it might look familiar.

On to the meat.

Tax Part I: The 16th was never ratified

Russo does not really explain this argument. He makes the unsupported allegation that a cadre of bankers bribed the Secretary of State (rather amusingly named Philander Knox) to falsely certify the ratification, and then moves on. The only support he gives for the failure to ratify is a statement from U.S. District Court Judge James C. Fox in 2003: "If you...examined [the 16th Amendment] carefully, you would find that a sufficient number of states never ratified the Amendment." A bit of googling reveals that this quote is from a hearing (not a court opinion) for a temporary restraining order in the case of Sullivan v. USA. Several websites promised the transcript, but all the links were dead. The closest I could find was a tax protestor website which gave me this somewhat expanded version of the quote: " "I think if you were to go back and try to find and review the ratification of the 16th amendment, which was the Internal Revenue, income tax, I think if you went back and examined that carefully, you would find that a sufficient number of states never ratified that amendment. ... Yet nonetheless, I'm sure no court's going to say that the 16th Amendment permitting income tax is void for any reason". This is more an expression of the futility of the argument than an actual determination that the 16th was never ratified. Additionally, it is (as noted above) not a judicial determination of law. It is a judge making an offhand, non-binding statement during a hearing. It's not a finding of law.

There has been a finding of law regarding the ratification, in the case of U.S. v. Thomas (a 7th Circuit case from 1986, which the Supreme Court declined to review). Unfortunately, I was unable to locate a free online source for the text of this case, however, in looking at this issue for a previous thread, I verified the following quote which can be found a bunch of places online:

...Thirty-eight states ratified the sixteenth amendment, and thirty-seven sent formal instruments of ratification to the Secretary of State. (Minnesota notified the Secretary orally, and additional states ratified later; we consider only those Secretary Knox considered.) Only four instruments repeat the language of the sixteenth amendment exactly as Congress approved it. The others contain errors of diction, capitalization, punctuation, and spelling. The text Congress transmitted to the states was: "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." Many of the instruments neglected to capitalize "States," and some capitalized other words instead. The instrument from Illinois had "remuneration" in place of "enumeration"; the instrument from Missouri substituted "levy" for "lay"; the instrument from Washington had "income" not "incomes"; others made similar blunders.


"Thomas insists that because the states did not approve exactly the same text, the amendment did not go into effect. Secretary Knox considered this argument. The Solicitor of the Department of State drew up a list of the errors in the instruments and--taking into account both the triviality of the deviations and the treatment of earlier amendments that had experienced more substantial problems--advised the Secretary that he was authorized to declare the amendment adopted. The Secretary did so.
"Although Thomas urges us to take the view of several state courts that only agreement on the literal text may make a legal document effective, the Supreme Court follows the "enrolled bill rule." If a legislative document is authenticated in regular form by the appropriate officials, the court treats that document as properly adopted. Field v. Clark, 143 U.S. 649, 36 L.Ed. 294, 12 S.Ct. 495 (1892). The principle is equally applicable to constitutional amendments. See Leser v. Garnett, 258 U.S. 130, 66 L.Ed. 505, 42 S.Ct. 217 (1922), which treats as conclusive the declaration of the Secretary of State that the nineteenth amendment had been adopted. In United States v. Foster, 789 F.2d. 457, 462-463, n.6 (7th Cir. 1986), we relied on Leser, as well as the inconsequential nature of the objections in the face of the 73-year acceptance of the effectiveness of the sixteenth amendment, to reject a claim similar to Thomas's. See also Coleman v. Miller, 307 U.S. 433, 83 L. Ed. 1385, 59 S. Ct. 972 (1939) (questions about ratification of amendments may be nonjusticiable). Secretary Knox declared that enough states had ratified the sixteenth amendment. The Secretary's decision is not transparently defective. We need not decide when, if ever, such a decision may be reviewed in order to know that Secretary Knox's decision is now beyond review."

This passage determines that the Sixteenth was validly adopted, among other reasons, because the Supreme Court follows the "enrolled bill" doctrine. This concept has been explicated several times by the Supreme Court.

Leser v. Garnet ruled, among other issues, that "As the Legislatures ... had power to adopt the resolutions of ratification, official notice to the Secretary, duly authenticated, that they had done so, was conclusive upon him, and, being certified to by his proclamation, is conclusive upon the courts." Leser v. Garnet also stated that the rule in Field v. Clark was applicable. Field v. Clark was not a case surrounding an Amendment. Instead, it dealt with a statute which, subsequent to its passage, was challenged as being different from that passed by Congress. The Court ruled that "...the authentication of an enrolled bill, by the official signatures of the presiding officers of the two houses and of the president, as an act which has passed congress, and been approved by the president..." cannot be undone by evidence that the bill should have been different. Applied to the amendment process, the ruling in Leser states that once a legislature has notified the Secretary of State that ratification has occurred, it can't be rescinded or challenged.

Even more damning, Coleman v. Miller involved a challenge by a state as to its own ratification of an Amendment. Coleman v. Miller reached a similar result, when the Court refused to set aside the ratification (although the Amendment itself never passed). It also noted that, insofar as the Constitution deferred to Congress the power to "run the show" in the Amendment process, the Court would be very reluctant to set aside any Congressional action. Although the Court specifically declined to rule on the "justicability" of the issue (Article III courts generally cannot decide "political questions" such as the manner in which a statute was negotiated or arrived at), that clearly underlies their hesitancy.

The rule, in short, is that once a bill is certified enrolled, there is no means by which anyone can then countermand that certification. The states, as the entities ratifying (and, specifically, not individuals) need to make clear an objection at the time the Secretary of State releases the list. Otherwise, game over.

Note that Mr. Russo never really goes into the argument surrounding the ratification, however, it seems likely that he is using the argument found in the book "The Law that Never Was", that states that several states made minor revisions to the Amendment before ratifying it, and that some did not ratify it by a formal act of legislature. These issues, too, have been addressed.

The Constitution (deliberately) does not set forth the manner in which states are to ratify an amendment. All it says is that Amendments are valid "...when ratified by the legislatures of three fourths of the several states, or by conventions in three fourths thereof, as the one or the other mode of ratification may be proposed by the Congress." For most proposed amendments, including he one at issue here, Congress generally proposes the former.

That doesn't get us there, though. The legislature has the power, but it's not clear (from the Constitution) how they exercise the power. The Constitution itself was subject to a very particular process, specifically at the demand of the founders, as to the manner in which it was ratified. However, that specific process was not extended to future amendments.

There have been a couple cases which describe the manner in which an amendment needs to be ratified. Hawke v. Smith dealt with an attempt by an Ohio resident to enjoin the legislature of Ohio from endorsing an amendment to the constitution because an amendment to the Ohio constitution would have required a state wide referendum on that endorsement. The court rejected the suit, and in so doing, clarified certain provisions surrounding state ratification of amendments:

"The argument to support the power of the state to require the approval by the people of the state of the ratification of amendments to the federal Constitution through the tedium of a referendum rests upon the proposition that the federal Constitution requires ratification by the legislative action of the states through the medium provided at the time of the proposed approval of an amendment. This argument is fallacious in this-ratification by a state of a constitutional amendment is not an act of legislation within the proper sense of the word. It is but the expression of the assent of the state to a proposed amendment"

...


Article 1, section 4, plainly gives authority to the state to legislate within the limitations therein named. Such legislative action is entirely different from the requirement of the Constitution as to the expression of assent or dissent to a proposed amendment to the Constitution. In such expression no legislative action is authorized or required.

(Emphasis added)

So, there is no requirement that a formal resolution be passed by the legislature. All that is required is that the legislature assent to the passage of an Amendment. Note also that the Supreme Court decided this as a matter of Federal, specifically Constitutional law. The only entity that can dictate the manner in which assent is given is Congress, and then only between the two manners provided in the Constitution. I believe there was some discussion of an Amendment which would, itself, provide that Amendments could be ratified by popular national vote, but it was determined that that would destroy the independence of states.

Tax Part II: Not just invalid, but ineffective

After a brief segue in which Mr. Russo gives us a small taste of things to come (hint: evil bankers!), he goes on to say that, not only was the 16th Amendment never adopted, but the law that was enacted due to the Amendment is ineffective to do what the government wants it to do. Logical query at this point: If the 16 th Amendment was instituted by bribery, why would the evildoers waste that bribe by then causing an ineffective law to be passed?

I had anticipated the celebrated "861" argument which has landed Wesley Snipes on the wanted list. Generally, the "there is no law..." argument leads to that statement, and, in fact, many of the people quoted in the movie have gone on record as supporting the 861 argument. However Mr. Russo surprised me by never making that argument. Instead, he (and his interviewees) reference several Supreme Court decisions (because, as I was gratified to see, they agree that the Supreme Court is always correct with regard to the Constitution). These are discussed momentarily.

First, there is a significant amount of discussion regarding the IRS's refusal to show the tax protestors "the law" which requires them to pay tax. Also referenced is at least one ad that offered a reward for anyone who could locate "the law". This is a common tax protestor tactic (and nearly always leads directly into the 861 argument).

There is a supposedly damning press conference in which IRS Commissioner Joe Banister appears to avoid a question as to what the law is, however, the clip is very clearly edited, as the question is asked of a completely different person.

"The law" is, in fact 26 U.S.C. Section 1. This law has been put before the tax protestors interviewed in the movie, who then reject it as non-responsive due to the 861 argument, or other reasons (which appear to be what this movie is banking on). Neither argument is correct....26 U.S.C. Section 1 does just what it purports to do: Imposes a tax on individuals.

The actual argument appears to begin with a mention of Stanton v. Baltic Mining Co., a 1916 Supreme Court case. Stanton depends largely upon the ruling in Brushaber v.Union Pacific RR, also a 1916 Supreme Court case, and which is mentioned several times in the movie.

Brushaber is famous among people who took tax classes in law school (like me) for being incredibly difficult to follow. It held, briefly, that there are two types of tax: Direct and indirect. Direct taxes are subject to the requirement of "apportionment", that is, being distributed equally among the states according to their census. Indirect taxes are not. Prior to the 16 th Amendment, the "income" tax that existed at that point was ruled to be a direct tax, and subject to apportionment. Brushaber held that the 16th removed that requirement.

This is what causes the "no new powers of taxation" discussion. Congress could (and did) tax incomes prior to the 16th Amendment. The manner in which that tax could Constitutionally be imposed was changed by the 16 th, however.



"It is clear on the face of [the 16th] that it does not purport to confer power to levy income taxes in a generic sense,-an authority already possessed and never questioned, [240 U.S. 1, 18] -or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the Amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the income was derived"

Note that this is precisely the opposite of what the guy with the welding goggles at the beginning of the movie says. The income tax, although arguably (and I say arguably because the pre-16th ruling that said it was covered a much earlier version of the income tax) a direct tax, is not subject to the requirement of apportionment.

Back to Stanton. Stanton dealt with a similar issue, with another corporation averring that the income tax was inappropriately applied. Stanton further expounded on the rule in Brushaber: "the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed [240 U.S. 103, 113] in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived,-that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed. "

In other words, an income tax is now a particular type of non-apportionment tax. Prior to the 16th, a court could view the source of the income being taxed to determine if apportionment was required. After the 16 th, the source was immaterial ("incomes from whatever source derived"), and no apportionment is necessary.

Out of order, but the movie also mentions in passingStratton's Independence v. Howbert, which is cited by the next couple cases. However, Stratton's Independence dealt with a situation that pre-dated the 16th. It contains some discussion of the difference between capital and income (which is brought up in the next couple cases), but it's ruling is irrelevant, as the Constitution changed after the rule would be applicable.

The movie moves on to Eisner v. Macomber, which it asserts defines "income" in some unspecified, but restrictive manner. I note, amusingly, that contrary to the recent statements decrying the liberalization and globalization of the Court, this 1919 case includes several citations to foreign law. That's not relevant to this discussion, though. Macomber actually deals with the question of whether a stock dividend could be considered a "gain" for purposes of income (the court says it can't, because no income is distributed to him...he has only a share of interest in possible future income...the stock dividend dilutes his previously held stock). To impose a tax on ownership of the corporation would be a direct tax subject to apportionment. The case does, however, go a long way towards defining "income" for purposes of the 16 th. "Income may be defined as the gain derived from capital, from labor, or from both combined,' provided it be understood to include profit gained through a sale or conversion of capital assets.

From this case, the movie moves backwards to Doyle v. Mitchell which, somehow, Russo asserts, limits that broad definition to corporate activity. I am not sure how a 1918 case could limit one from 1919, but let's see what the case says. Doyle, yet again, defines income as "the gain derived from capital, from labor, or from both combined". It primarily turns on the distinction between capital and gain on capital (the latter is income, the former is not) but I simply do not see how it can be read to limit such gain to corporate activity. It certainly addressed the income of a corporation, but it does nothing to limit the application of income tax to corporations. The only argument I can imagine Russo making is to view each individual as analogous to a corporation, and their "earnings" as personal capital, and not a gain. This is simply not supported by the case.

I am truly not sure what Russo's argument is. None of the cases he asserts support his conclusion that there is no tax on his income. In fact, the cases hold precisely the opposite. Any gain from labor is income, and taxable without apportionment. I see no issue, and kind of see why the attorney from Morgan Lewis got frustrated with him (although, knowing that firm, Russo was probably paying upwards of $700/hr to talk with him).


Tax Part III: Miscellania

Russo rounds out his tax discussion with a few chestnuts about the power of the IRS: to wit, the "voluntary" nature of the Tax Code. This is a misunderstanding of the holding in Flora v.U.S. Flora holds, in part, "Our system of taxation is based upon voluntary assessment and payment, not upon distraint". This is a reference to the fact that taxpayers calculate their own tax and send it in rather than having the government assess it and come after them. Distraint is the power of a creditor to seize stuff from a debtor in payment of the debt. Rather than just sieze taxes, the IRS depends upon voluntary submission of taxes.

Another old favorite concludes this, the tax portion of our show: Requiring to file a 1040 violates your Fifth Amendment right against non-incrimination. This is just flat-out silly. The relevant portion of the Fifth is: " nor shall be compelled in any criminal case to be a witness against himself" Regardless of what charges could be brought based on Mr. Russo's return, the return itself is not a criminal case. There is no Fifth Amendment implication here.