[Home]  [Headlines]  [Latest Articles]  [Latest Comments]  [Post]  [Sign-in]  [Mail]  [Setup]  [Help] 

Status: Not Logged In; Sign In

The INCREDIBLE Impacts of Methylene Blue The LARGEST Eruptions since the Merapi Disaster in 2010 at Lewotobi Laki Laki in Indonesia Feds ARREST 11 Leftists For AMBUSH On ICE, 2 Cops Shot, Organized Terror Cell Targeted ICE In Texas What is quantum computing? 12 Important Questions We Should Be Asking About The Cover Up The Truth About Jeffrey Epstein TSA quietly scraps security check that every passenger dreads Iran Receives Emergency Airlift of Chinese Air Defence Systems as Israel Considers New Attacks Russia reportedly used its new, inexpensive Chernika kamikaze drone in the Ukraine Iran's President Says the US Pledged Israel Wouldn't Attack During Previous Nuclear Negotiations Will Japan's Rice Price Shock Lead To Government Collapse And Spark A Global Bond Crisis Beware The 'Omniwar': Catherine Austin Fitts Fears 'Weaponization Of Everything' Roger Stone: AG Pam Bondi Must Answer For 14 Terabytes Claim Of Child Torture Videos! 'Hit Us, Please' - America's Left Issues A 'Broken Arrow' Signal To Europe Cash Jordan Trump Deports ‘Thousands of Migrants’ to Africa… on Purpose Gunman Ambushes Border Patrol Agents In Texas Amid Anti-ICE Rhetoric From Democrats Texas Flood Why America Built A Forest From Canada To Texas Tucker Carlson Interviews President of Iran Mosoud Pezeshkian PROOF Netanyahu Wants US To Fight His Wars RAPID CRUSTAL MOVEMENT DETECTED- Are the Unusual Earthquakes TRIGGER for MORE (in Japan and Italy) ? Google Bets Big On Nuclear Fusion Iran sets a world record by deporting 300,000 illegal refugees in 14 days Brazilian Women Soccer Players (in Bikinis) Incredible Skills Watch: Mexico City Protest Against American Ex-Pat 'Invasion' Turns Viole Kazakhstan Just BETRAYED Russia - Takes gunpowder out of Putin’s Hands Why CNN & Fareed Zakaria are Wrong About Iran and Trump Something Is Going Deeply WRONG In Russia 329 Rivers in China Exceed Flood Warnings, With 75,000 Dams in Critical Condition Command Of Russian Army 'Undermined' After 16 Of Putin's Generals Killed At War, UK Says Rickards: Superintelligence Will Never Arrive

Business/Finance
See other Business/Finance Articles

Title: Westminster man told to stop running tax scheme
Source: Baltimore Sun
URL Source: http://www.baltimoresun.com/news/lo ... story?coll=bal-local-headlines
Published: Dec 4, 2006
Author: AP
Post Date: 2006-12-04 18:32:27 by Starwind
Ping List: *unUsual Suspects*     Subscribe to *unUsual Suspects*
Keywords: Kotmair, Save-A-Patriot Fellowship
Views: 3125
Comments: 200

A Westminster man has been barred by a federal judge from running a scheme in which he promised to help members avoid paying federal taxes, the U.S. Department of Justice announced today.

The "Save-A-Patriot Fellowship" run by John Baptist Kotmair Jr. falsely advised that clients didn't have to pay taxes and could legally withdraw from the Social Security system, U.S. District Judge William Nickerson said in his ruling. Despite legal action by the U.S. Justice Department, Kotmair's organization continued to file frivolous protest letters with the Internal Revenue Service on behalf of more than 800 clients and showed "no inclination ... to cease their activities," Nickerson noted.

Nickerson's order, issued last week, permanently bars Kotmair and his organization from representing or assisting anyone in corresponding with the IRS, or preparing court filings relating to income taxes. Kotmair and his organization must also notify all individuals involved in the scheme of the injunction and provide the Justice Department with the names of the customers, their e-mail addresses and telephone and Social Security numbers.

The injunction also must be posted prominently on the organization's Web sites for a year, and fraudulent promotional materials must be removed from the sites.

Poster Comment:

Kotmair's defense and taxation arguments were inane to put it charitably. His website (where he's to post the injunction) is at http://save-a-patriot.org/

Stupid tax-protestors and their schemes just muddy the water for legitimate tax-protest arguments. Kotmair, Schiff, Schultz, Rose all will become boilerplate examples of tax schemes which will be used unfairly to broad-brush and defeat otherwise legitimate arguments, rasing the cost and complexity to properly take on the IRS.

I cite Joe Banister as an example of how to do it right, intelligently, and the above tax schemes just make it difficult if not impossible for people like Banister to prevail honestly on the merits. Subscribe to *unUsual Suspects*

Post Comment   Private Reply   Ignore Thread  

Pollack was nullified by the Sixteenth Amendment to the Constitution.

I've looked through your cites but found no evidence to support this claim.

From American Constitutional Law, Third Edition, Volume One, by Laurence H. Tribe, at page 843:

In response, there was indeed confusion as to whether the income tax should be considered a direct or indirect tax. The Pollack and Flint cases were in regard to two separate taxes and they came to separate conclusions. There is no dispute here that the 16th amendment clarified that a tax on income was an indirect tax, but that does not mean that the Pollack case was overturned. Independent, non-judicial authors merely claiming such does not carry legal weight and certainly are not up to the standard of SC precedent.

From A Practical Companion to the Constitution, by Jethro K. Lieberman, at page 55:

[...] That decision was overruled by the adoption of the SIXTEENTH AMENDMENT, which expressly permits Contress to tax incomes without apportionment.

The author gave no evidence or support for this claim.

Since then the Court has not struck down any federal tax as violating the apportionment clause and has upheld several taxes against such a challenge, including the federal estate tax [1687] and the federal gift tax. [284]

That's perfectly understandable, as the income tax is indirect required to follow the rule of uniformity, and not direct, requiring apportionment. The 16th amendment would have blocked any such challenges.

From Constitutional Law, Principles and Policies, Second Edition, by Erwin Chemerinsky, at page 270-1:

[...] In 1913, eighteen years after Pollock, the Sixteenth Amendment was ratified to overturn that decision and to allow a federal income tax.

This is bunk as, again, there's no support for the claim that the 16th overturned Pollack.

The Court eventually abandoned the distinction between direct and indirect taxes.

This is serious bunk. The Constitution has never lost that distinction, and there's no SC case that supports the claim.

In other words, unless Congress were to create a national property tax, all other taxes are very lokely to be deemed indirect and threfore are constitutional even without apportionment among the states.

Correct, but as an indirect tax, the tax is not upon money, which would be direct, but upon certain activities that might generate the income, as Flint makes clear: "In other words, the tax is imposed upon the doing of business of the character described, and the measure of the tax is to be income..." The money generated is merely the measure by which the tax is computed, and not the subject of the tax itself. The same applies today, such that any income generated outside of a taxable activity is not income taxable. (That is, within the states of the union).

From Constitutional Law, Fourth Edition, by John E. Nowak and Ronald D. Rotunda, at page 188-9:

The sixteenth amendment, which permits imposition of a federal income tax without apportionment among the states,

No, it does not. At least not in the conventional definition of the word "permits". The 16th qualifies the income tax as indirect, and as an indirect, shows that congress always had that power.

...was necessitated by the five to four decision in Pollack v. Farmer's Loan & Trust Co. [2] Forty-two years later, with its decision in New York ex rel. Cohn v. Graves, [3] the Court in effect overruled Pollack and in so doing rendered the sixteenth amendment redundant.

Here's a link to the Graves case: http://supreme.justia.com/u s/300/308/case.html

It had nothing to do with federal taxation. It addressed the question of whether NY could tax someone on income derived from property in NJ. Obviously federal constitutional restrictions on direct/indirect taxation do not apply to states, so the entire case is completely removed from the issue of federal taxation. I challenge you to read it and show me where it says Pollack was overturned.

From Constitutional Law, National Power and Federalism, Second Edition, by Christopher N. May and Allan Ides, at page 29:

The Sixteenth Amendment overturned Pollock v. Farmers' Loan & Trust Co., 157 U.S. 601 (1895), which had barred the federal government from collecting an income tax that was not apportioned among the states.

Bunk. The SC stated that congress always had the power to tax incomes based on the rule of uniformity. The 16th merely clarified that income taxes would always be considered indirect.

[From the tax tale site] January 24, 1916: In Brushaber vs. Union Pacific Railroad, the Supreme Court ruled: that the 16th Amendment doesn’t over-rule the Court’s ruling in the Pollock case which declared general income taxes unconstitutional;

Pollack did NOT declare general income taxes unconstitutional.

On this I'll agree, though it was considered unconstitutional insofar as it was construed as a direct tax without apportionment. I'll take this moment to say that I did not pen the site and do take certain exception to wordings. I offered it as a general summary on the history of income taxation.

The Sixteenth Amendment explicitly authorizes taxes, without apportionment, upon incomes from whatever source derived.

Not true. It does not authorize anything. Remember it does not confer any new powers of taxation, but merely confines the power to tax income, which it always had, to the indirect class.

The 16th Amendment did not Amend the U.S. Constitution; The 16th Amendment only clarified the federal governments existing authority to create excise taxes without apportionment.

I agree this is penned incorrectly. Yes it amended the Constitution. Of course it did. What it did not do is grant any new taxing power to congress.

In summary, I don't think any of your numerous citations support the claims that Pollack was overturned or that there is no longer any Constitutional distinction between direct and indirect taxes.

Care to try again?

Pinguinite.com

Neil McIver  posted on  2006-12-06   9:11:55 ET  Reply   Trace   Private Reply  

If one is involved in a taxable activity (cigarette manufacturing for example) the tax is on the event, not upon the money. The money is merely the measurement used to determine the amount owed.

Great minds....

Pinguinite.com

Neil McIver  posted on  2006-12-06   9:15:04 ET  Reply   Trace   Private Reply  

Taxation as envisioned by the framers was to share the nations wealth by paying for the necessary government requirements through taxing those entities privileged to benefit from the collective resources owned by the nation in general. (Not to tax every dollar in circulation 20 times over).

An example would be a coal mining operation owned by John Doe that extracts the nations natural resources while benefitting only Mr. Doe. The tax is imposed on the fact that the nations ore is only making Mr. Doe rich and it's not all his, so a tax makes it possible for the entire nation to benefit indirectly when the money serves to support the government we all need. The same holds true for the nations air-waves. We all own them, but we all can't extract individual profits from them, so a certain amount is taxed into the general fund.

To think for an instant that this country's taxing formula was ever meant to tax everything is ludicrous especially considering the people's immediate history.

Today, Americans are so willing to be taxed on every-frickin-breath of air they breathe it causes those with a brain to suffer the ravages of the morons !

I'd have to admit I was one of those morons for a long time too ... but it was investigation of sub-section 6331(a) of the IR Code that pursuaded me to investigate further. Especially after the schemers at the IRS had left that section off of a form wherein every other clause they quoted had A, B, C, and D printed. So why did they leave off (a) ? Because there it explains who is and who ain't subject to their B.S. ... and they leave it off so you can subject yourself to their crap if you so choose.

Thanks !

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   9:33:50 ET  Reply   Trace   Private Reply  

By the way, I'm sure the preponderance of this kind of literature about the income tax is what plagues the current judicial mindset and goes a long way to explaining why lower court cases go the way they often do. Most have, of course been schooled with such literature. Though it doesn't explain why judges do stuff like allow someone to be charged for violating the law that merely prescribes the penalty to be imposed upon someone for evasion or failure to file.

But the question is, do those sources really stand up to Constitutional Law and current SC precedent, or do they simply rewrite them by obfuscation as though the Constitution was a "living document" that can mutate over time?

Pinguinite.com

Neil McIver  posted on  2006-12-06   9:40:25 ET  Reply   Trace   Private Reply  

Taxation is necessary. I'm no anarchist, which is the only alternative to a zero tax society.

I've not really appreciated the community property aspect of mining and drilling operations until recently due to my time in Ecuador. There, as in Venezuela, oil is considered the property of the people and stories of corruption in which senior officials are paid off in the back room for bargain drilling rights is a serious problem. The winners are the oil companies, pretty much all foreign, and the bribed officials. The loosers are the people deprived of their birthright, which is the equal right of access to their own country's resources. The fact that many in Ecuador are poor reinforces the sentiment, and is also probably one of the main the source of communist sympathies since such corruption is viewed as an trademark of capitalism.

So yes, mining and drilling rights are morally taxable activities as is any activity that takes away worth from society.

Today, Americans are so willing to be taxed on every-frickin-breath of air they breathe it causes those with a brain to suffer the ravages of the morons !

Well, that's how it is in a pure democracy. Whatever the majority wants taxed is taxed, and many Americans love taxes.

investigation of sub-section 6331(a) of the IR Code that pursuaded me to investigate further. Especially after the schemers at the IRS had left that

I'm thinking that's the "who can be levied" section, if I'm not mistaken. Yes, it's peculiar that they jumped right to subsection 'b' in their quotation.

Pinguinite.com

Neil McIver  posted on  2006-12-06   10:41:29 ET  Reply   Trace   Private Reply  

Well, that's how it is in a pure democracy. Whatever the majority wants taxed is taxed, and many Americans love taxes.

I'm thinking that's the "who can be levied" section, if I'm not mistaken. Yes, it's peculiar that they jumped right to subsection 'b' in their quotation.

Here's my theory:

If one participates in the Socialist Security Insurance Scheme that person has opted out of the Representative Republic founded and operated under Constitutional restraints, having entered into a contract for "expected" benefits and volunteered into the Socialist Democracy.

I contacted the IRS after researching the 6331(a) portion of the Lien, Levy and Distraint clause only to find that it applies to Federal Officers of Federal Corporations, and people living on federal land, enclaves and some Islands like Guam and the Mauanna Islands ... but that ain't me ! Upon contacting a bozo at the number provided on the form and inquiring about the code, he stated that "there are a lot codes and I don't know them all" ... I asked him to get a supervisor and he told me no one else was there and hung up on me !!!

Starwind seems to suffer prosecutorial prejudice while ignoring the Constitution, precedent, history and common sense. As far as I could tell Joe Banister's arguments were Bill Bentson's non-ratification of the 16th Amendment, and a recently devised 5th Amendment claim against filing a 1040 based upon self-incrimination, ignoring the fact that you swear under penalty of perjury to be a Federal U.S. Citizen ... just like an immigrant from Vietnam, China or Russia. The courts have stated a million times that even if the 16th wasn't properly ratified, we've operated under it for so long it doesn't matter. (Cute huh) !

Birthright isn't free, one has a duty to protect the country which is something foreigners granted the "privilege" of citizenship generally avoid.

I don't know how others approach problems like the tax code, but as soon as I have enough info to see a fraud ... I'm out !

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   13:02:26 ET  Reply   Trace   Private Reply  

Pollack was nullified by the Sixteenth Amendment to the Constitution.

I've looked through your cites but found no evidence to support this claim.

POLLOCK v. FARMERS' LOAN & TRUST CO., 157 U.S. 429 (1895)

But the acceptance of the rule of apportionment was one of the compromises which made the adoption of the constitution possible, and secured the creation of that dual form of government, so elastic and so strong, which has thus far survived in unabated vigor. If, by calling a tax indirect when it is essentially direct, the rule of protection could be frittered away, one of the great landmarks defining the boundary between the nation and the states of which it is composed, would have disappeared, and with it one of the bulwarks of private rights and private property.

We are of opinion that the law in question, so far as it levies a tax on the rents or income of real estate, is in violation of the constitution, and is invalid.

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.

Obviously, Pollock ruled that taxes on income from property (rents, real estate) was in reality an unapportioned direct tax and therefor unconstitutional, whereas the 16th amendment specifically removes taxes on income from any source from the apportionment requirement regardless of being construed direct, or indirect.

It is on that basis that the 16th amendment overruled Pollock.

Note further that Pollock was a narrow ruling to begin with and reinforced congress' authroity to levy taxes provided they were direct and apportioned or indirect and uniform. But the 16th amendment broadened that authority to remove the apportionment test on income from any source.

[...] That decision was overruled by the adoption of the SIXTEENTH AMENDMENT, which expressly permits Contress to tax incomes without apportionment.

The author gave no evidence or support for this claim.

It [16th Amendment] does not authorize anything. Remember it does not confer any new powers of taxation, but merely confines the power to tax income, which it always had, to the indirect class.

Oh please Neil, which part of "The Congress shall have power" ... " to tax incomes, from whatever source" ... "without apportionment ... census or enumeration" do you not get? That is precisely the tax-protestor mindset that keeps shooting itself (and the rest of us) in the foot.

By the way, I'm sure the preponderance of this kind of literature about the income tax is what plagues the current judicial mindset and goes a long way to explaining why lower court cases go the way they often do. Most have, of course been schooled with such literature.

Oh, I assure you the preponderance of established case law "plagues" the current judicial mindset, and absolutely do lower courts anticipate Appellate and Supreme reviews, as do lawyers and litigants. That is the way the system is supposed to work. The system is not supposed to just keep circling endlessly and repetitously re-arguing established facts anew everytime someone reasserts a discredited belief. It isn't an internet discussion forum.

Our mindsets are supposed to be "plagued" by what has been legislated, ajudicated, written down for all to read. Why, they even go so far as to teach that in law school and drive it home in internships. The hubris.

Would that such an understanding likewise "plague" the tax-protestor mindset, in futile hope they'd do their homework better and stop mucking it up for the rest of us.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   13:18:07 ET  Reply   Trace   Private Reply  

Oh, I assure you the preponderance of established case law "plagues" the current judicial mindset, and absolutely do lower courts anticipate Appellate and Supreme reviews, as do lawyers and litigants.

Lower courts rule in error quite often, forcing litigants to feed lawyers whether they win or lose through every appellate level necessary to get it overturned ... usually wearing a defendant out or bankrupting him/her.

Congress doesn't have plenary authority to enslave the populace, but to listen to your arguments one might think so. If congress said tomorrow that they could take every penny you made, would that be Law ?

The term "income" is where the confusion begins because people think their earnings from labor are income and they're not.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   13:33:12 ET  Reply   Trace   Private Reply  

If congress said tomorrow that they could take every penny you made, would that be Law ?

If they enacated it as law and the Supreme court upheld it, yes it would be Law, wouldn't it. Or did you think it's only Law when you say it is?

The term "income" is where the confusion begins because people think their earnings from labor are income and they're not.

And which part of "The Congress shall have power" ... " to tax incomes, from whatever source" ... "without apportionment ... census or enumeration" do you not get?

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   13:44:51 ET  Reply   Trace   Private Reply  

(1). If they enacated it as law and the Supreme court upheld it, yes it would be Law, wouldn't it. Or did you think it's only Law when you say it is?

And which part of "The Congress shall have power" ... " to tax incomes, from whatever source" ... "without apportionment ... census or enumeration" do you not get?

(1). If they enacted it, it would be law until the Supreme Court struck it down, which is quite different from your statement because someone negatively impacted by the law would have to have standing and then fight their way through a corrupt court system to the Supreme Court in order to have it heard.

(2). Yes, they can Tax incomes [profit or gain from capital investments] from whatever (taxable) source without apportionment ... the source must be a taxable source, not everything under the sun is a taxable source ... it's like I said earlier, our tax system has never intended to tax every dollar in circulation 20 times ...

Yes, of course, it's only law when I say it is !

I think I asked you earlier if you could state what three things taxes are "imposed" upon, I don't think you responded. If you did I missed it but would be interested to know.

On a different note I'd like for you to express your opinion regarding the 14th Amendment admonishment against the citizens questioning the national debt.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   14:10:49 ET  Reply   Trace   Private Reply  

I've looked through your cites but found no evidence to support this claim.

Let me help.

16TH AMENDMENT: "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."

See if you can find what was left of Pollack overturned by South Carolina v. Baker.

http://laws.findlaw.com/us/485/505.htm

U.S. Supreme Court SOUTH CAROLINA v. BAKER, 485 U.S. 505 (1988)

* * *

BRENNAN, J., delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined, and in which SCALIA, J., joined except for Part II. STEVENS, J., filed a concurring opinion, post, p. 527. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, post, p. 528. REHNQUIST, C. J., filed an opinion concurring in the judgment, post, p. 528. O'CONNOR, J., filed a dissenting opinion, post, p. 530. KENNEDY, J., took no part in the consideration or decision of the case.

* * *

III

South Carolina contends that even if a statute banning state bearer bonds entirely would be constitutional, 310 unconstitutionally violates the doctrine of intergovernmental tax immunity because it imposes a tax on the interest earned on a state bond. We agree with South Carolina that 310 is [485 U.S. 505, 516] inconsistent with Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), which held that any interest earned on a state bond was immune from federal taxation.

The Secretary and the Master, however, suggest that we should uphold the constitutionality of 310 without explicitly overruling Pollock because 310 does not abolish the tax exemption for state bond interest entirely but rather taxes the interest on state bonds only if the bonds are not issued in the form Congress requires. In our view, however, this suggestion implicitly rests on a rather mischievous proposition of law. If, for example, Congress imposed a tax that applied exclusively to South Carolina and levied the tax directly on the South Carolina treasury, we would be obligated to adjudicate the constitutionality of that tax even if Congress allowed South Carolina to escape the tax by restructuring its state government in a way Congress found more to its liking. The United States cannot convert an unconstitutional tax into a constitutional one simply by making the tax conditional. Whether Congress could have imposed the condition by direct regulation is irrelevant; Congress cannot employ unconstitutional means to reach a constitutional end. Under Pollock, a tax on the interest income derived from any state bond was considered a direct tax on the State and thus unconstitutional. 157 U.S., at 585 -586. If this constitutional rule still applies, Congress cannot threaten to tax the interest on state bonds that do not conform to congressional dictates. We thus decline to follow a suggestion that would force us to embrace implicitly a proposition of law far more controversial than the current validity of Pollock's ban on taxing state bond interest, and proceed to address whether Pollock should be explicitly overruled.

Under the intergovernmental tax immunity jurisprudence prevailing at the time, Pollock did not represent a unique immunity limited to income derived from state bonds. Rather, Pollock merely represented one application of the more general rule that neither the Federal nor the State Governments could tax income an individual directly derived from any contract with another government. Not only was it unconstitutional for the Federal Government to tax a bondowner on the interest he or she received on any state bond, but it was also unconstitutional to tax a state employee on the income earned from his employment contract, Collector v. Day, 11 Wall. 113 (1871), to tax a lessee on income derived from lands leased from a State, Burnet v. Coronado Oil, 285 U.S. 393 (1932), or to impose a sales tax on proceeds a vendor derived from selling a product to a state agency, Indian Motocycle Co. v. United States, 283 U.S. 570 (1931). Income derived from the same kinds of contracts with the Federal Government were likewise immune from taxation by the States. See Weston v. City Council of Charleston, 2 Pet. 449 (1829) (federal bond interest immune from state taxation); Dobbins v. Commissioners of Erie County, 16 Pet. 435 (1842) (federal employee immune from state tax on salary); Gillespie v. Oklahoma, 257 U.S. 501 (1922) (income derived from federal lease immune from state tax); Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218 (1928) (vendor immune from sales tax on vendor's proceeds from sale to the United States). Cases concerning the tax immunity of income derived from state contracts freely cited principles established in federal tax immunity cases, and vice versa. See, e. g., Coronado Oil, supra, at 398; Indian Motocycle, supra, at 575-579; Pollock, supra, at 586. See generally Indian Motocycle, supra, at 575 (immunity of States from federal tax equal to immunity of Federal Government from state tax); Metcalf & Eddy v. Mitchell, 269 U.S. 514, 521 -522 (1926); Collector v. Day, supra, at 127.

This general rule was based on the rationale that any tax on income a party received under a contract with the government was a tax on the contract and thus a tax "on" the government because it burdened the government's power to enter into the contract. The Court in Pollock borrowed its reasoning directly from the decision in Weston exempting federal bond interest from state taxation:

"'The right to tax the contract to any extent, when made, must operate upon the power to borrow before it is exercised, and have a sensible influence on the contract. The extent of this influence depends on the will of a distinct government. To any extent, however inconsiderable, it is a burthen on the operations of government. . . . The tax on government stock is thought by this court to be a tax on the contract, a tax on the [government's] power to borrow money . . . and consequently to be repugnant to the Constitution.'" Pollock, supra, at 586, quoting Weston, supra, at 467, 468.

Thus, although a tax was collected from an independent private party, the tax was considered to be "on" the government because the tax burden might be passed on to it through the contract. This reasoning was used to define the basic scope of both federal and state tax immunities with respect to all types of government contracts. See, e. g., Coronado Oil, supra, at 400-401 ("Here the lease . . . was an instrumentality of the State . . . . To tax the income of the lessee arising therefrom would amount to an imposition upon the lease itself"); Panhandle Oil, supra, at 222 ("It is immaterial that the seller and not the purchaser is required to report and make payment to the State. Sale and purchase constitute a transaction by which the tax is measured and on which the burden rests"); Gillespie, supra, at 505-506 ("`A tax upon the leases is a tax upon the power to make them . . .'" (quoting Indian Territory Illuminating Oil Co. v. Oklahoma, 240 U.S. 522, 530 (1916))). The commonality of the rationale underlying all these immunities for government contracts [485 U.S. 505, 520] was highlighted by Indian Motocycle, 283 U.S. 570 (1931). In that case, the Court reviewed the then current status of intergovernmental tax immunity doctrine, observing that a tax on interest earned on a state or federal bond was unconstitutional because it would burden the exercise of the government's power to borrow money and that a tax on the salary of a State or Federal Government employee was unconstitutional because it would burden the government's power to obtain the employee's services. Id., at 576-578. It then concluded that under the same principle a sales tax imposed on a vendor for a sale to a state agency was unconstitutional because it would burden the sale transaction. Id., at 579.

The rationale underlying Pollock and the general immunity for government contract income has been thoroughly repudiated by modern intergovernmental immunity case law. In Graves v. New York ex rel. O'Keefe, 306 U.S. 466 (1939), the Court announced: "The theory . . . that a tax on income is legally or economically a tax on its source, is no longer tenable." Id., at 480. The Court explained:

"So much of the burden of a non-discriminatory general tax upon the incomes of employees of a government, state or national, as may be passed on economically to that government, through the effect of the tax on the price level of labor or materials, is but the normal incident of the organization within the same territory of two governments, each possessing the taxing power. The burden, so far as it can be said to exist or to affect the government in any indirect or incidental way, is one which the Constitution presupposes...." Id., at 487.

See also James v. Dravo Contracting Co., 302 U.S. 134, 160 (1937) (the fact that a tax on a Government contractor "may increase the cost to the Government . . . would not invalidate the tax"); Helvering v. Gerhardt, 304 U.S. 405, 424 (1938). The thoroughness with which the Court abandoned the burden theory was demonstrated most emphatically when the Court upheld a state sales tax imposed on a Government contractor even though the financial burden of the tax was entirely passed on, through a cost-plus contract, to the Federal Government. Alabama v. King & Boozer, 314 U.S. 1 (1941). The Court stated:

"The Government, rightly we think, disclaims any contention that the Constitution, unaided by Congressional legislation, prohibits a tax exacted from the contractors merely because it is passed on economically, by the terms of the contract or otherwise, as part of the construction cost to the Government. So far as such a non-discriminatory state tax upon the contractor enters into the cost of the materials to the Government, that is but a normal incident of the organization within the same territory of two independent taxing sovereignties. The asserted right of the one to be free of taxation by the other does not spell immunity from paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax immunity. So far as a different view has prevailed, we think it no longer tenable." Id., at 8-9 (citations omitted).

King & Boozer thus completely foreclosed any claim that the nondiscriminatory imposition of costs on private entities that pass them on to States or the Federal Government unconstitutionally burdens state or federal functions. Subsequent cases have consistently reaffirmed the principle that a non-discriminatory tax collected from private parties contracting with another government is constitutional even though part or all of the financial burden falls on the other government. See Washington v. United States, 460 U.S. 536, 540 (1983); United States v. New Mexico, 455 U.S. 720, 734 (1982); United States v. County of Fresno, 429 U.S. 452, 460 -462, and n. 9 (1977); United States v. City of Detroit, 355 U.S. 466, 469 (1958).

With the rationale for conferring a tax immunity on parties dealing with another government rejected, the government contract immunities recognized under prior doctrine were, one by one, eliminated. Overruling Burnet v. Coronado Oil, 285 U.S. 393 (1932), and Gillespie v. Oklahoma, 257 U.S. 501 (1922), the Court upheld the constitutionality of a federal tax on net income a corporation derived from a state lease in Helvering v. Mountain Producers Corp., 303 U.S. 376 (1938). See also Oklahoma Tax Comm'n v. Texas Co., 336 U.S. 342 (1949) (upholding constitutionality of state tax on gross income derived from Indian lease). Later, the Court explicitly overruled Collector v. Day, 11 Wall. 113 (1871), and upheld the constitutionality of a nondiscriminatory state tax on the salary of a federal employee. Graves v. New York ex rel. O'Keefe, supra. And in the course of upholding a sales tax on a cost-plus Government contractor, the Court in King & Boozer overruled Panhandle Oil Co. v. Mississippi ex rel. Knox, 277 U.S. 218 (1928). See also James, supra (upholding state tax on gross income independent contractor received from Federal Government). The only premodern tax immunity for parties to government contracts that has so far avoided being explicitly overruled is the immunity for recipients of governmental bond interest. That this Court has yet to overrule Pollock explicitly, however, is explained not by any distinction between the income derived from government bonds and the income derived from other government contracts, but by the historical fact that Congress has always exempted state bond interest from taxation by statute, beginning with the very first federal income tax statute. Act of Oct. 3, 1913, ch. 16, II(B), 38 Stat. 168.

In sum, then, under current intergovernmental tax immunity doctrine the States can never tax the United States directly but can tax any private parties with whom it does business, even though the financial burden falls on the United States, as long as the tax does not discriminate against the United States or those with whom it deals. See Washington, supra, at 540; County of Fresno, supra, at 460-463; City of Detroit, supra, at 473; Oklahoma Tax Comm'n, supra, at 359-364. A tax is considered to be directly on the Federal Government only "when the levy falls on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities." New Mexico, supra, at 735. The rule with respect to state tax immunity is essentially the same, see, e. g., Graves, supra, at 485; Mountain Producers Corp., supra, at 386-387, except that at least some nondiscriminatory federal taxes can be collected directly from the States even though a parallel state tax could not be collected directly from the Federal Government. See generally n. 11, supra.

We thus confirm that subsequent case law has overruled the holding in Pollock that state bond interest is immune from a nondiscriminatory federal tax. We see no constitutional reason for treating persons who receive interest on government bonds differently than persons who receive income from other types of contracts with the government, and no tenable rationale for distinguishing the costs imposed on States by a tax on state bond interest from the costs imposed by a tax on the income from any other state contract. We stated in Graves that "as applied to the taxation of salaries of the employees of one government, the purpose of the immunity was not to confer benefits on the employees by relieving them from contributing their share of the financial support of the other government, whose benefits they enjoy, or to give an advantage to a government by enabling it to engage employees at salaries lower than those paid for like services by other employers, public or private . . . ." 306 U.S., at 483 . Likewise, the owners of state bonds have no constitutional entitlement not to pay taxes on income they earn from state bonds, and States have no constitutional entitlement to issue bonds paying lower interest rates than other issuers.

Indeed, this Court has in effect acknowledged that a holder of a Government bond could constitutionally be taxed on bond interest in Memphis Bank & Trust Co. v. Garner, 459 U.S. 392 (1983), which involved a state tax on federal bond interest. Although that case involved an interpretation of 31 U.S.C. 742, we premised our statutory interpretation on the observation that "[o]ur decisions have treated 742 as principally a restatement of the constitutional rule." 459 U.S., at 397 . We then stated: "Where, as here, the economic but not the legal incidence of the tax falls upon the Federal Government, such a tax generally does not violate the constitutional immunity if it does not discriminate against holders of federal property or those with whom the Federal Government deals." Ibid. (emphasis added).

TEFRA 310 thus clearly imposes no direct tax on the States. The tax is imposed on and collected from bondholders, not States, and any increased administrative costs incurred by States in implementing the registration system are not "taxes" within the meaning of the tax immunity doctrine. See generally United States v. Mississippi Tax Comm'n, 421 U.S. 599, 606 (1975) (describing tax as an enforced contribution to provide for the support of government). Nor does 310 discriminate against States. The provisions of 310 seek to assure that all publicly offered long-term bonds are issued in registered form, whether issued by state or local governments, the Federal Government, or private corporations. See supra, at 510. Accordingly, the Federal Government has directly imposed the same registration requirement on itself that it has effectively imposed on States. The incentives States have to switch to registered bonds are necessarily different than those of corporate bond issuers because only state bonds enjoy any exemption from the federal tax on bond interest, but the sanctions for issuing unregistered corporate bonds are comparably severe. See ibid. Removing the tax exemption for interest earned on state bonds would not, moreover, create a discrimination between state and corporate bonds since corporate bond interest is already subject to federal tax.

IV

Because the federal imposition of a bond registration requirement on States does not violate the Tenth Amendment and because a nondiscriminatory federal tax on the interest earned on state bonds does not violate the intergovernmental tax immunity doctrine, we uphold the constitutionality of 310(b)(1), overrule the exceptions to the Special Master's Report, and approve his recommendation to enter judgment for the defendant.

It is so ordered.

nolu_chan  posted on  2006-12-06   14:22:44 ET  Reply   Trace   Private Reply  

Though it doesn't explain why judges do stuff like allow someone to be charged for violating the law that merely prescribes the penalty to be imposed upon someone for evasion or failure to file.

Do a felony, do the time, pay the fine, and pay the cost of prosecution.

http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=26&sec=7201

United States Code
TITLE 26 - INTERNAL REVENUE CODE
SUBTITLE F - PROCEDURE AND ADMINISTRATION
CHAPTER 75 - CRIMES, OTHER OFFENSES, AND FORFEITURES
SUBCHAPTER A - CRIMES
PART I - GENERAL PROVISIONS

U.S. Code as of: 01/19/04
Section 7201. Attempt to evade or defeat tax

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

================

Section 6673. Sanctions and costs awarded by courts

(a) Tax court proceedings

(1) Procedures instituted primarily for delay, etc.

Whenever it appears to the Tax Court that -

(A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay,

(B) the taxpayer's position in such proceeding is frivolous or groundless, or

(C) the taxpayer unreasonably failed to pursue available administrative remedies,

the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $25,000.

[snip]

================

nolu_chan  posted on  2006-12-06   14:45:52 ET  Reply   Trace   Private Reply  

If they enacted it, it would be law until the Supreme Court struck it down, which is quite different from your statement

Not all that different. In fact highly controversial laws often sit unenforced because prosecutors know/suspect it may be struck down, and they wait until a test case comes along. But I would have to operate on the presumption it would be upheld, and then if a case could be made for an error, I'd have to litigate.

If for example SCOTUS ruled "Congress shall the right to take every penny made by Starwind" and did not address the uniformity requirement or ruled contra to uniformity, on that basis I might prevail.

Yes, they can Tax incomes [profit or gain from capital investments] from whatever (taxable) source without apportionment ... the source must be a taxable source, not everything under the sun is a taxable source ...

But now you're arguing provisions/deductions of the tax code and you can't very well agree that Amendment 16 can tax your labor-based income, and then proffer a P/L or investment argument that it can't, while simultaneously dismissing Title 26 as law (which law provides the basis for your P/L argument).

I think I asked you earlier if you could state what three things taxes are "imposed" upon, I don't think you responded. If you did I missed it but would be interested to know.

You did ask, I opted not to answer. I see little point in my trying to shoe-horn the entirety of tax law into your expectations.

On a different note I'd like for you to express your opinion regarding the 14th Amendment admonishment against the citizens questioning the national debt.

Similarly, I don't care to reiterate what constitutional scholars have already written which you already have chosen to ignore.

I responded to your post #86, as I had just made the point in my post #85 of the tax-protestor mindset repeatedly ignoring the obvious, which your questions overlooked. It seemed a illustrative opportunity; I was mistaken; it wasn't.

I'm not big on repetition, being misquoted, or ad-hominem inuendo, as that seems to have escaped your notice.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   14:47:15 ET  Reply   Trace   Private Reply  

But the question is, do those sources really stand up to Constitutional Law and current SC precedent, or do they simply rewrite them by obfuscation as though the Constitution was a "living document" that can mutate over time?

The Constitution most certainly changes when it is amended. Regarding the income tax, the Sixteenth Amendment changed the Constitution to have it allow taxation upon income from any source without regard to apportionment.

Notably, originally booze was constitutional. Then booze was unconstitutional. It may have been a dumb idea, but it was duly ratified and people went to prison over it. Then booze was constitutional again.

nolu_chan  posted on  2006-12-06   15:03:36 ET  Reply   Trace   Private Reply  

You did ask, I opted not to answer. I see little point in my trying to shoe-horn the entirety of tax law into your expectations.

I think you have a gift for sounding intelligent while knowing nothing.

The Income tax is a complex subject and even Judges have difficulty with it.

In an article called Thomas Walter Swan, 57 Yale Law Journal No. 2, 167, 169 (December 1947), Judge Hand wrote:

In my own case the words of such an act as the Income Tax . . . merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception — couched in abstract terms that offer [me] no handle to seize hold of [and that] leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help recalling a saying of William James about certain passages of Hegel: that they were no doubt written with a passion of rationality; but that one cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   15:04:23 ET  Reply   Trace   Private Reply  

The Income tax is a complex subject and even Judges have difficulty with it.

Indeed, so there was little point in my trying to shoe-horn it into your three pat premises.

#41. To: Neil McIver, Starwindbag (#32)

I think you have a gift for sounding intelligent while knowing nothing.

I at least rest my arguments on more than insults.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   15:16:55 ET  Reply   Trace   Private Reply  

Define this term "income" ... if the term is defined as a profit or gain from a capital investment ... then:

LINK

United States Code
TITLE 26 - INTERNAL REVENUE CODE
SUBTITLE A - INCOME TAXES
CHAPTER 1 - NORMAL TAXES AND SURTAXES
SUBCHAPTER B - COMPUTATION OF TAXABLE INCOME
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE INCOME, ETC.

U.S. Code as of: 01/19/04
Section 61. Gross income defined

(a) General definition

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.

LINK

United States Code
TITLE 26 - INTERNAL REVENUE CODE
SUBTITLE A - INCOME TAXES
CHAPTER 1 - NORMAL TAXES AND SURTAXES
SUBCHAPTER B - COMPUTATION OF TAXABLE INCOME
PART I - DEFINITION OF GROSS INCOME, ADJUSTED GROSS INCOME, TAXABLE INCOME, ETC.

U.S. Code as of: 01/19/04
Section 63. Taxable income defined

(a) In general

Except as provided in subsection (b), for purposes of this subtitle, the term "taxable income" means gross income minus the deductions allowed by this chapter (other than the standard deduction).

(b) Individuals who do not itemize their deductions

In the case of an individual who does not elect to itemize his deductions for the taxable year, for purposes of this subtitle, the term "taxable income" means adjusted gross income, minus -

(1) the standard deduction, and
(2) the deduction for personal exemptions provided in section 151.

nolu_chan  posted on  2006-12-06   15:19:54 ET  Reply   Trace   Private Reply  

Notably, originally booze was constitutional. Then booze was unconstitutional. It may have been a dumb idea, but it was duly ratified and people went to prison over it. Then booze was constitutional again.

That's a good point. The Sixteeenth Amendment didn't repeal Article 1 section 8 subsection 1 or Article 1 section 9 subsection 4 which covered the means of collecting the tax dependent upon whether it was direct or indirect.

The 16th Amendment speaks to indirect taxation, an excise tax to be collected uniformly throughout the States, based upon taxable events conducted by one who profits from taxable events that becomes a taxpayer by so doing.

The type of event (source) determines whether or not taxable income is derived from it, and when it is a taxable event the dollar amount of total profit is used as the measurement to determine the amount owed by the taxpayer.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   15:20:17 ET  Reply   Trace   Private Reply  

(a) General definition

Except as otherwise provided in this subtitle, gross income means all income

Nolu ... it's impossible to define the word income with the word income. This phraseology doesn't define income.

I believe the word income was defined in the 1939 Income Tax Act (going from memory) and it was defined as a profit or gain from a capital investment. The term income has never been otherwise defined in law.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   15:26:19 ET  Reply   Trace   Private Reply  

The courts have stated a million times that even if the 16th wasn't properly ratified, we've operated under it for so long it doesn't matter. (Cute huh) !

Benson's work seems to show that the 16th never was ratified, but the courts have declared the matter out of their jurisdiction. But I'm not so sure they are wrong about that, at least 70 plus years after the fact and after everyone involved has died. It really should have been cought and challenged at the time of course. Founders never considered the possibility that this might happen.

Pinguinite.com

Neil McIver  posted on  2006-12-06   15:32:00 ET  Reply   Trace   Private Reply  

I'm of the opinion that the framers did the best job they could to guard against a slave system. They gave us the basis for taxation that would support a relatively small government, adequate (Army/Navy), and even allowed a couple of years for oppressive taxes under war conditions.

There's no way they would accept what D.C. is extorting today through weasel worded legaleze.

Actually, it's simple to see that they intended for the tax to be somewhat voluntary. Those wishing to partake in certain activities or purchasing certain taxable items had the choice whether they wished to participate and therein obligate themselves to the tax.

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-06   15:41:19 ET  Reply   Trace   Private Reply  

Obviously, Pollock ruled that taxes on income from property (rents, real estate) was in reality an unapportioned direct tax and therefor unconstitutional, whereas the 16th amendment specifically removes taxes on income from any source from the apportionment requirement regardless of being construed direct, or indirect.

That's not what the SC said it did. The SC said the 16th merely qualified the income tax as an indirect tax. They were quite plain about that.

But the 16th amendment broadened that authority to remove the apportionment test on income from any source.

It did not broaden any authority whatsoever, as it conferred no new powers of taxation. The SC declared that it merely ensured that income taxation was to always be considered an indirect tax and weighed as such with the rule of uniformity, and never to be weighed as a direct tax as a tax upon property requiring apportionment. Again, the SC was plain about this.

The author presumed his readership would in fact compare the language of the 16th amendment text against the opinion in Pollock (granted, a lot to presume these days). A review of Brushaber and Stanton rulings (already cited above) reinforces the caselaw viewpoint that the 16th amendment overruled Pollock.

One might well consider the 16th amendment in a vacume and make this observation. Indeed were I to do so I'd conclude the same thing. However, the 16th amendment is not the only Constitutional provision to discuss taxation, and therein lies the trap you fall into. The 16th *must* be taken in context with the rest of the Constitution which prescribes that direct taxes must be apportioned, and indirect must be uniform, and it's on that basis that the SC declared that the 16th clarified the income tax falling into the indirect class and did not confer any new taxation powers, did not create an exception to the direct tax requirement, and did not create a new 3rd tax classification beyond direct and indirect. I'm not making this up, Star. That's what they said.

Oh please Neil, which part of "The Congress shall have power" ... " to tax incomes, from whatever source" ... "without apportionment ... census or enumeration" do you not get?

I guess the same part the USSC didn't get in Brushaber & Flint. If you want to declare those decisions overturned or wrong, you are free to take that position.

Pinguinite.com

Neil McIver  posted on  2006-12-06   15:48:44 ET  Reply   Trace   Private Reply  

That's not what the SC said it did. The SC said the 16th merely qualified the income tax as an indirect tax. They were quite plain about that.

Ok, then, please cite the specific ruling wherein SCOTUS so states. I'd appreciate both the case, and a direct quote on which I can search.

It did not broaden any authority whatsoever, as it conferred no new powers of taxation. The SC declared that it merely ensured that income taxation was to always be considered an indirect tax and weighed as such with the rule of uniformity, and never to be weighed as a direct tax as a tax upon property requiring apportionment. Again, the SC was plain about this.

Again, please cite the specific ruling wherein SCOTUS so states. I'd appreciate both the case, and a direct quote on which I can search.

The 16th *must* be taken in context with the rest of the Constitution which prescribes that direct taxes must be apportioned, and indirect must be uniform, and it's on that basis that the SC declared that the 16th clarified the income tax falling into the indirect class and did not confer any new taxation powers, did not create an exception to the direct tax requirement, and did not create a new 3rd tax classification beyond direct and indirect. I'm not making this up, Star. That's what they said.

And again, if you would please cite the specific ruling wherein SCOTUS so states. I'd appreciate both the case, and a direct quote on which I can search.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   17:19:16 ET  Reply   Trace   Private Reply  

See if you can find what was left of Pollack overturned by South Carolina v. Baker.

Apparently a portion of Pollock was held to be overturned in this decision, but not the entire decision, so there would indeed be something left, as you challenged. You chose your words carefully.

The Pollock decision involved two complaints as follows:

The bill charged that the provisions in respect of said alleged income tax incorporated in the act of congress were unconstututional, null, and void, in that the tax was a direct tax in respect of the real estate held and owned by the company in its own right and in its fiduciary capacity as aforesaid, by being imposed upon the rents, issues, and profits os said real estate, and was likewise a direct tax .....

The bill further charged that the income-tax provisions of the act were likewise unconstitutional, in that they imposed a tax on incomes not taxable ud er the constitution, and likewise income derived from the stocks and bonds of the states of the United States, and counties and municipalities therein, ...

In the Carolina decision, you highlighted

We thus confirm that subsequent case law has overruled the holding in Pollock

But the full sentence continues thus:

that state bond interest is immune from a nondiscriminatory federal tax.

Therefore, this decision in 1988, 93 years after the Pollock decision, only overturned, or stated more precisely, confirmed that "subsequent case law" had overturned, the latter portion of the case, not the matter related to taxation of real estate property as a direct tax without apportionment, which is the heart of the matter being discussed. Do you claim otherwise?

Pinguinite.com

Neil McIver  posted on  2006-12-06   18:28:07 ET  Reply   Trace   Private Reply  

As I said, some are charged with violating penalty statutes, one of which you posted. It is not possible to violate a law that prescribes a penalty. Or it is, actually, *IF* you are a judge sitting on a bench and dispense a penalty in excess of that allowed in the statute. That would constitute a violation of a penalty statute, and a judge is the only person who could possibly violate section 26 USC 7201. To accuse someone of evasion of taxes and claim that he violated this section which provides the penalty for violation is corruption. In order to be properly penalized with 7201, the state must show the citation of the tax referred to in "tax imposed by this title or the payment thereof", but they do not. They instead just claim that he violated 7201, likely because, one could only surmise, they cannot point to the statute that was violated in the IRC with respect to income taxes.

Your posting of the evasion penalty statute is completely disingenuous to the point I made previously.

Pinguinite.com

Neil McIver  posted on  2006-12-06   18:38:30 ET  Reply   Trace   Private Reply  

But the question is, do those sources really stand up to Constitutional Law and current SC precedent, or do they simply rewrite them by obfuscation as though the Constitution was a "living document" that can mutate over time?

The Constitution most certainly changes when it is amended.

.... duh.....

I said "mutate" which is different from "amend". Some contend it's meaning can change over time absent amendment hense the "living document" doctrine. But that doctrine basically means that the Constitution has no effective substance or weight.... which seems to be your argument.

Regarding the income tax, the Sixteenth Amendment changed the Constitution to have it allow taxation upon income from any source without regard to apportionment.

This claim has already been addressed in my posts above. I won't rehash.

Pinguinite.com

Neil McIver  posted on  2006-12-06   18:50:37 ET  Reply   Trace   Private Reply  

I believe the word income was defined in the 1939 Income Tax Act (going from memory) and it was defined as a profit or gain from a capital investment. The term income has never been otherwise defined in law.

I don't think it's ever been defined by statute. "Gross Income" is as close as it gets. I think the 39 code, section 22, if memory serves, is the ancestor to section 61. ....if that's the part of the ITA your refer to.

Pinguinite.com

Neil McIver  posted on  2006-12-06   18:55:32 ET  Reply   Trace   Private Reply  

I'm of the opinion that the framers did the best job they could to guard against a slave system.

No one in their right mind could blame them for not doing better. What did they have to work with? Very little outside of academic books and their own experience in what did NOT work. Being familiar with the heavy hand of their version of King George, they clearly prided themselves in developing a system that preserves freedom, whereas today's politicians pride themselves in wielding power and reaching into the lives of every citizen.

I think where they failed was in giving due consideration to the judiciary. They spent all their time on the Legislature.

They gave us the basis for taxation that would support a relatively small government, adequate (Army/Navy), and even allowed a couple of years for oppressive taxes under war conditions.

No army. Only the navy. States provided the armies.

There's no way they would accept what D.C. is extorting today through weasel worded legaleze.

Somehow the phrase "no way they would accept" doesn't embody the full, complete and utter outraged contempt I would expect from them for what goes on today. Can you imagine, at the 1787 convention, the reception that would have greeted the idea of a federal tax of each person's wages, particularly to the point where each was expected to make detailed reports of their earnings to the monstrosity? And some people today champion it as very American (going well beyond believing it a necessary evil).

Pinguinite.com

Neil McIver  posted on  2006-12-06   19:10:38 ET  Reply   Trace   Private Reply  

That's not what the SC said it did. The SC said the 16th merely qualified the income tax as an indirect tax. They were quite plain about that.

Ok, then, please cite the specific ruling wherein SCOTUS so states. I'd appreciate both the case, and a direct quote on which I can search.

I think all three of my statements are adequetly supported by the Brushaber and Stanton cases which Nolu already posted in #77 above which I'm copying here.

http://laws.findlaw.com/us/240/103.html

STANTON v. BALTIC MINING CO, 240 U.S. 103 (1916)

The contention is that as the tax here imposed is not on the net product, but in a sense somewhat equivalent to a tax on the gross product of the working of the mine by the corporation, therefore the tax is not within the purview of the 16th Amendment, and consequently it must be treated as a direct tax on property because of its ownership, and as such void for want of apportionment. 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.

And here's Brushaber, also copied for my own convenience sake from Nolu's #77

http://laws.findlaw.com/us/240/1.html

BRUSHABER v. UNION PACIFIC R. CO., 240 U.S. 1 (1916)

[T]he 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 also wholly without foundation ...

Pinguinite.com

Neil McIver  posted on  2006-12-06   19:28:47 ET  Reply   Trace   Private Reply  

Ok, I'll try to step us thru this:

Your post #100 took exception with my post #85 and your followup post #107 cited Brushaber and Stanton as the SC rulings in support of your exception to my post#85, to wit:

Obviously, Pollock ruled that taxes on income from property (rents, real estate) was in reality an unapportioned direct tax and therefor unconstitutional, whereas the 16th amendment specifically removes taxes on income from any source from the apportionment requirement regardless of being construed direct, or indirect.

That's not what the SC said it did. The SC said the 16th merely qualified the income tax as an indirect tax. They were quite plain about that.

I think all three of my statements are adequetly supported by the Brushaber and Stanton cases

What I said was:

the 16th amendment specifically removes taxes on income from any source from the apportionment requirement regardless of being construed direct, or indirect.

I said the 16th amendment prevents income taxes from being subject to the apportionment requirement, regardless of being construed direct or indirect. I did not say or imply the 16th amendment moved income taxes from indirect to direct.

Moreover, your statement (underline mine):

16th merely qualified the income tax as an indirect tax.

is not entirely correct since obviously the purpose of the 16th Amendment as affirmed by both Brushaber and then Stanton was to prevent income taxes (whether sourced from direct ownership or from indirect events/usage) from being subject to the apportionment criteria The 16th Amendment did not merely "qualified the income tax as an indirect tax", it further changed income taxes from being subjected to the apportionment test regardless of their source.

Perhaps these are distinctions without a difference, but I don't see that my statement was in error, or that your stated exception to it was entirely correct.

You also excerpted the 2nd sentance from my paragraph, and then took exception to that excerpt:

Note further that Pollock was a narrow ruling to begin with and reinforced congress' authroity to levy taxes provided they were direct and apportioned or indirect and uniform. But the 16th amendment broadened that authority to remove the apportionment test on income from any source.

It did not broaden any authority whatsoever, as it conferred no new powers of taxation. The SC declared that it merely ensured that income taxation was to always be considered an indirect tax and weighed as such with the rule of uniformity, and never to be weighed as a direct tax as a tax upon property requiring apportionment. Again, the SC was plain about this.

Obviously the "authority" to which I referred and to which you excepted refers to the prior sentance wherein I alluded to congress' authority to levy taxes provided they were direct and apportioned or indirect and uniform. My second sentance then said that authority was broadened to remove the apportionment test on income from any source.

I will agree the 16th Amendment did not confer "new powers of taxation" as SCOTUS had by then already recognized (as per 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. And it has also never been questioned from the foundation, without stopping presently to determine under which of the separate headings the power was properly to be classed, that there was authority given, as the part was included in the whole, to lay and collect income taxes.

But the amendment clearly and indisputably broadened Congress' existing authority to remove the apportionment test on income from any source:

This is the text of the Amendment:

'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.'

It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense,-an authority already possessed and never questioned, -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.

I didn't say the 16th Amendment gave congress new taxation authority, but only the authority to broaden income taxation by removing the apportionment test.

Much of this is the aftermath and debris of your arguing that the 16th Amendment did not overrule Pollock, which position you repeat in the following exchange:

[...] That decision was overruled by the adoption of the SIXTEENTH AMENDMENT, which expressly permits Contress to tax incomes without apportionment.

The author gave no evidence or support for this claim.

The author presumed his readership would in fact compare the language of the 16th amendment text against the opinion in Pollock (granted, a lot to presume these days). A review of Brushaber and Stanton rulings (already cited above) reinforces the caselaw viewpoint that the 16th amendment overruled Pollock.

It [16th Amendment] does not authorize anything. Remember it does not confer any new powers of taxation, but merely confines the power to tax income, which it always had, to the indirect class.

Oh please Neil, which part of "The Congress shall have power" ... " to tax incomes, from whatever source" ... "without apportionment ... census or enumeration" do you not get? That is precisely the tax- protestor mindset that keeps shooting itself (and the rest of us) in the foot.

In the above exchange you persist in arguing (your statements in italics) that somehow the author had to support or give evidence that the 16th Amendment expressly permits Congress to tax incomes without apportionment, which the language clearly does, and which SCOTUS affirmed in both Brushaber and Stanton.

You said the 16th Amendment does not authorize anything (it obviously does authorize levying income taxes without regard to source and without applying the apportionment test) and that the 16th Amendment merely confines the power to tax income, which it always had, to the indirect class flies in the face of your argument that Pollock was not overruled by the 16th! If Pollock were not overruled by the16th Amendment, income taxes would be unconstitutional unapportioned direct taxes.

Lastly, your 3rd exception (which you assert is supported by both Brushaber and Stanton) was:

The 16th *must* be taken in context with the rest of the Constitution which prescribes that direct taxes must be apportioned, and indirect must be uniform, and it's on that basis that the SC declared that the 16th clarified the income tax falling into the indirect class and did not confer any new taxation powers, did not create an exception to the direct tax requirement, and did not create a new 3rd tax classification beyond direct and indirect. I'm not making this up, Star. That's what they said.

You can't argue this both ways. You can't argue Pollock was not overruled by the 16th and simultaneously argue the 16th merely confines the power to tax income, which it always had, to the indirect class.

One of these things is not the same.

Ergo, the 16th conferred no new tax powers, did not broaden any taxing authority, only classified the income tax as always to be a indirect tax, and did not create any new class of taxation. I believe this covers all the points I made that you wanted SC support for.

Well, that wasn't your entire argument. You seem to overlook the specifics of the language of the 16th Amendment, insofar as you invaribly decline to acknowledge that it removed the apportionment tests on income taxes regardless of their source and it doesn't specifically place income taxes into either direct or indirect classes. It is silent on the issue of in which class an income tax may be. And I've yet to see you acknowledge that Pollock was overruled by the16th Amendment.

Do you agree the 16th amendment removed the requirement to test income taxes, regardless of source, by apportionment?

Do you agree the 16th amendment overrulled Pollock?, If not, what provisions of Pollock are still in effect and as of what date?

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-06   22:19:43 ET  Reply   Trace   Private Reply  

Thanks for composing this. I think part of our difference might be just implied assumptions about verbage used, but not all.

I said the 16th amendment prevents income taxes from being subject to the apportionment requirement, regardless of being construed direct or indirect. I did not say or imply the 16th amendment moved income taxes from indirect to direct.

I believe I understood your statement here correctly but disagree anyway. When you say "prevents income taxes from being subject to the apportionment requirement" I take issue because it implies that there are no requirements whatsoever. The rule of uniformity has requirements/restrictions of its own. So for me it's important to be clear that the income tax is an indirect tax. True, apportionment is not a needed factor in ensuring an income tax is constitutional, but that's because income taxes are not direct taxes.

It seems you've stated a belief that the 16th simply removed the apportionment requirement, but I don't think that's a correct statement. In qualifying the income tax as indirect, which the SC did, apportionment is no longer a consideration. Maybe this is semantics to you?

Moreover, your statement (underline mine):

16th merely qualified the income tax as an indirect tax.

is not entirely correct since obviously the purpose of the 16th Amendment as affirmed by both Brushaber and then Stanton was to prevent income taxes (whether sourced from direct ownership or from indirect events/usage) from being subject to the apportionment criteria The 16th Amendment did not merely "qualified the income tax as an indirect tax", it further changed income taxes from being subjected to the apportionment test regardless of their source.

Well, prior to the 16th, there was uncertainty whether the income tax was a direct or indirect tax. So when you say it "changed the income taxes from being sujected to the apportionment test", I think this is automatic with it being classed as indirect. But your implication, if I'm understanding you right, that it removed the apportionment requirement without replacing it with requirements that apply to all indirect taxes (i.e. uniformity) is in error. As an indirect tax, the income tax cannot be imposed on property as tax on property is characteristic of a direct tax.

You also excerpted the 2nd sentance from my paragraph, and then took exception to that excerpt:

Note further that Pollock was a narrow ruling to begin with and reinforced congress' authroity to levy taxes provided they were direct and apportioned or indirect and uniform. But the 16th amendment broadened that authority to remove the apportionment test on income from any source.

It did not broaden any authority whatsoever, as it conferred no new powers of taxation. The SC declared that it merely ensured that income taxation was to always be considered an indirect tax and weighed as such with the rule of uniformity, and never to be weighed as a direct tax as a tax upon property requiring apportionment. Again, the SC was plain about this.

Obviously the "authority" to which I referred and to which you excepted refers to the prior sentance wherein I alluded to congress' authority to levy taxes provided they were direct and apportioned or indirect and uniform. My second sentance then said that authority was broadened to remove the apportionment test on income from any source.

But what you're saying, or maybe strongly implying here, is that whereas before, the income tax as an unapportioned direct tax was unconstitutional, the 16th made the same thing constitutional. I believe that is wrong because the effect of the 16th was to force all income taxes to be construed as indirect taxes.

An analogy might be all foods falling into one of two classes of perishable and nonperishable, and all perishable food must be kept in the frig, and non-perishable must be kept in the pantry. And there might be confusion as to whether, say, a poundcake falls into the perishable or nonperishable class, and therefore, whether it should be kept in the frig or pantry (we can do a christmas analogy, right?). Along comes the 16th declaring that congress shall have the power to store pound cakes without refrigeration. The SC considers the amendment in light of the current kitchen rules (constitution) and finds that the effect of the 16th is that all poundcakes are always to be considered non-perishable, and therefore subject to all the food storage/handling rules applicable to nonperishable foods.

Carrying over your statement about income taxes no longer being subject to apportionment to this analogy would be a statement that pound cakes no longer need to be stored in the frig. But I take issue with that because as stated, it implies that pound cakes are both perishable and yet don't have to be stored/handled as a non-perishable food, which would make it a unique 3rd class of food. (Which as a holiday aside, many may argue about pound cakes). I mean, of course it doesn't go in the frig. In fact it's no longer permitted there since it's non-perishable. For me, the proper thing to say, in light of the Brushaber/Stanton decisions, is that pound cakes are non-perishable, and as such, are necessarily burdened with all the restrictions (and benefits) of nonperishable foods. With non-perishables, we no longer even talk about the frig. With the income tax, because of the 16th, we no longer talk about apportionment.

(Watch for my upcoming book: Your Christmas Season Guide to Income Taxes").

You obviously recognize indirect taxes as subject to the rule of uniformity as you've stated plainly. Do you recognize that income taxes are indirect?

But the amendment clearly and indisputably broadened Congress' existing authority to remove the apportionment test on income from any source:

'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.'

It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense,-an authority already possessed and never questioned, -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.

I didn't say the 16th Amendment gave congress new taxation authority, but only the authority to broaden income taxation by removing the apportionment test.

Well, my understanding is that it acheived this end by being categorized as an indirect tax, not by simply removing the apportionment requirement, as that would have made no statement about whether the income tax is direct or indirect, and Staton in particular made clear that income taxes were indirect. And I think it should be recognized that "broadening authority" of a tax by removing a test would certainly be conferring additional taxing power, which the SC said the 16th did not do.

Much of this is the aftermath and debris of your arguing that the 16th Amendment did not overrule Pollock, which position you repeat ...

The author presumed his readership would in fact compare the language of the 16th amendment text against the opinion in Pollock (granted, a lot to presume these days). A review of Brushaber and Stanton rulings (already cited above) reinforces the caselaw viewpoint that the 16th amendment overruled Pollock.

I don't see how. Unless it overruled it in the sense that, whereas Pollock construed the tax before them as direct being imposed without apportionment and therefore unconstitutional, in light of the 16th the tax should have been considered as indirect and therefore constitutional. I don't have a problem with that, so long as it's not construed as overruling the notion that direct taxes must be apportioned. I believe they must have been then and still must be today. But it would have made a difference in 1895 how that tax was imposed and applied due to restrictions on indirect taxes.

In the above exchange you persist in arguing (your statements in italics) that somehow the author had to support or give evidence that the 16th Amendment expressly permits Congress to tax incomes without apportionment, which the language clearly does, and which SCOTUS affirmed in both Brushaber and Stanton.

I think the point of contention has been addressed above in this post. Let me know otherwise.

You said the 16th Amendment does not authorize anything (it obviously does authorize levying income taxes without regard to source and without applying the apportionment test) and that the 16th Amendment merely confines the power to tax income, which it always had, to the indirect class flies in the face of your argument that Pollock was not overruled by the 16th!

By "not authorize anything" I was echoing the SC ruling that it "conferred no new powers of taxation". I'm aware of what the plain reading of the 16th implies, but it's meaning cannot be taken in isolation apart from the taxing provisions in the Constitution. The Brushabor/Stanton decisions did this, resulting in the "conferred no new powers" finding.

If Pollock were not overruled by the16th Amendment, income taxes would be unconstitutional unapportioned direct taxes.

Okay, then my statement above may well be where we can find agreement. That is, that the 16th could be considered to overrule Pollock *insofar* as it (Pollock) held that income taxes were direct taxes, but not so far as direct taxes must be apportioned. The former overruled but the latter not. Do we agree on this?

Well, that wasn't your entire argument. You seem to overlook the specifics of the language of the 16th Amendment, insofar as you invaribly decline to acknowledge that it removed the apportionment tests on income taxes regardless of their source and it doesn't specifically place income taxes into either direct or indirect classes.

The apportionment issue is addressed above. That the 16th doesn't specifically, or I'll choose the word explicitly, ID income as either direct or indirect, I'll agree. I do believe it results in income taxes falling into the indirect class out of consideration of it's relation to the rest of the Constitution as per Brushaber.

Do you agree the 16th amendment removed the requirement to test income taxes, regardless of source, by apportionment?

As per above, I feel a yes/no answer would not do the question justice due to implications, but would choose yes if forced to, with reservations.

Do you agree the 16th amendment overrulled Pollock?, If not, what provisions of Pollock are still in effect and as of what date?

I think that's addressed above.

Pinguinite.com

Neil McIver  posted on  2006-12-07   6:08:15 ET  Reply   Trace   Private Reply  

Let me preface my remarks by stating for the record my revulsion at the malignant cancer the tax code has become and the way it (in subserviance to the government's indebtness and fiscal irresponsibility) has metastisized through the law and twisted the constitution beyond recognition by the framers. I don't like it. I don't agree with it. But to prevail against it, one must recognize its strengths as well as weaknesses. It is imperative to understand what the law is as written and enforced.

At this juncture, our key difference seems to be more than semantic.

You seem of the opinion that the 16th Amendment did not change the law, such that an income tax may not be an unapportioned direct tax, and you assert an income tax may only be an "unapportioned" indirect tax, and you somewhat grudingly acknowledge that is "regardless of source" but you rely on an argument from silence; that being that because the 16th Amendment did not specifically move income tax from the indirect class to the direct class, you conclude from that silence that the "without apportionment and "without regard to source" language (which is clearly present - i.e. not silent) can not likewise permit a "direct" income tax on the owner ship of property.

The 16th Amendment is in essence an "end-run" around the direct/indirect classifications. Such classes no longer matter for income taxing purposes because the "source" whence the income is derived no longer matters and specifically apportionment regarding said sources no longer matters, and the only remaining matters are uniformity and the meaning of "income".

EISNER v. MACOMBER , 252 U.S. 189 (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. In Pollock v. Farmers' Loan & Trust Co., 158 U.S. 601, 15 Sup. Ct. 912, under the Act of August 27, 1894 (28 Stat. 509, 553, c. 349, 27), it was held that taxes upon rents and profits of real estate and upon returns from investments of personal property were in effect direct taxes upon the property from which such income arose, imposed by reason of ownership; and that Congress could not impose such taxes without apportioning them among the states according to population, as required by article 1, 2, cl. 3, and section 9, cl. 4, of the original Constitution.

Afterwards, and evidently in recognition of the limitation upon the taxing power of Congress thus determined, the Sixteenth Amendment was adopted, in words lucidly expressing the object to be accomplished:

'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.'

As repeatedly held, this did not extend the taxing power to new subjects, but merely removed the necessity which otherwise might exist for an apportionment among the states of taxes laid on income. Brushaber v. Union Pacific R. R. Co., 240 U.S. 1, 17-19, 36 Sup. Ct. 236, Ann. Cas. 1917B, 713, L. R. A. 1917D, 414; Stanton v. Baltic Mining Co., 240 U.S. 103, 112 et seq., 36 Sup. Ct. 278; Peck & Co. v. Lowe, 247 U.S. 165, 172, 173 S., 38 Sup. Ct. 432.

A proper regard for its genesis, as well as its very clear language, requires also that this amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal. This limitation still has an appropriate and important function, and is not to be overridden by Congress or disregarded by the courts.

In order, therefore, that the clauses cited from article 1 of the Constitution may have proper force and effect, save only as modified by the amendment, and that the latter also may have proper effect, it becomes essential to distinguish between what is and what is not 'income,' as the term is there used, and to apply the distinction, as cases arise, according to truth and substance, without regard to form. Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone that power can be lawfully exercised.

[snip]

After examining dictionaries in common use (Bouv. L. D.; Standard Dict.; Webster's Internat. Dict.; Century Dict.), we find little to add to the succinct definition adopted in two cases arising under the Corporation Tax Act of 1909 (Stratton's Independence v. Howbert, 231 U.S. 399, 415, 34 S. Sup. Ct. 136, 140 [58 L. Ed. 285]; Doyle v. Mitchell Bros. Co., 247 U.S. 179, 185, 38 S. Sup. Ct. 467, 469 [62 L. Ed. 1054]), '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, to which it was applied in the Doyle Case, 247 U.S. 183, 185, 38 S. Sup. Ct. 467, 469 (62 L. Ed. 1054).

Brief as it is, it indicates the characteristic and distinguishing attribute of income essential for a correct solution of the present controversy. The government, although basing its argument upon the definition as quoted, placed chief emphasis upon the word 'gain,' which was extended to include a variety of meanings; while the significance of the next three words was either overlooked or misconceived. 'Derived-from- capital'; 'the gain- derived-from-capital,' etc. Here we have the essential matter: not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however invested or employed, and coming in, being 'derived'- that is, received or drawn by the recipient (the taxpayer) for his separate use, benefit and disposal- that is income derived from property. Nothing else answers the description.

The same fundamental conception is clearly set forth in the Sixteenth Amendment-'incomes, from whatever source derived'-the essential thought being expressed with a conciseness and lucidity entirely in harmony with the form and style of the Constitution.

Now, for the record, the Eisner opinion went on to rule that a stock dividend (receipt of additional paper stock shares as a distribution of capitalized profits, which is not the same as a cash dividend) was *not* taxable as income:

We are clear that not only does a stock dividend really take nothing from the property of the corporation and add nothing to that of the shareholder, but that the antecedent accumulation of profits evidenced thereby, while indicating that the shareholder is the richer because of an increase of his capital, at the same time shows he has not realized or received any income in the transaction.

[snip]

Yet, without selling, the shareholder, unless possessed of other resources, has not the wherewithal to pay an income tax upon the dividend stock. Nothing could more clearly show that to tax a stock dividend is to tax a capital increase, and not income, than this demonstration that in the nature of things it requires conversion of capital in order to pay the tax.

Throughout the argument of the government, in a variety of forms, runs the fundamental error already mentioned-a failure to appraise correctly the force of the term 'income' as used in the Sixteenth Amendment, or at least to give practical effect to it. Thus the government contends that the tax 'is levied on income derived from corporate earnings,' when in truth the stockholder has 'derived' nothing except paper certificates which, so far as they have any effect, deny him present participation in such earnings. It contends that the tax may be laid when earnings 'are received by the stockholder,' whereas he has received none; that the profits are 'distributed by means of a stock dividend,' although a stock dividend distributes no profits; that under the act of 1916 'the tax is on the stockholder's share in corporate earnings,' when in truth a stockholder has no such share, and receives none in a stock dividend; that 'the profits are segregated from his former capital, and he has a separate certificate representing his invested profits or gains,' whereas there has been no segregation of profits, nor has he any separate certificate representing a personal gain, since the certificates, new and old, are alike in what they represent-a capital interest in the entire concerns of the corporation.

The point of Eisner in our discussion is the definition of "income" without regard to source which includes a gain on property owned, property which except for the 16th Amendment would have otherwise been exempt from direct income taxation.

This is no trivial or semantic distinction. While "paper" gains such as stock dividends via stock-splits remain non-taxable (because though recognizable, absent a sale they are not realized) realized gains such as interest on bonds (property owned), rent (from property owned) are taxed as income without regard to their source (property owned is in the direct class) and without regard to apportionment.

Worse, the Alternative Minimum Tax has in some instances pre-empted the "recognized but unrealized" aspect of "paper" gains, and consequently income taxes on exercise of stock options (whereby one pays money to take possession of an otherwise unsold paper asset), and other tangible assets are now also taxed as income - all by the definition of income set forth in Eisner enabled by the 16th Amendment's removal of consideration of "source" from which income is derived.

Were it not for the 16th Amendment's overruling of Pollock, income or gain derived from ownership of property would not be taxable.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-07   13:05:43 ET  Reply   Trace   Private Reply  

Let me preface my remarks by stating for the record my revulsion at the malignant cancer the tax code has become and the way it (in subserviance to the government's indebtness and fiscal irresponsibility) has metastisized through the law and twisted the constitution beyond recognition by the framers. I don't like it. I don't agree with it.

I certainly have no love for any tax that is imposed upon labor. Those who compare it to slavery are correct as it creates a "You work for me or you will die" mandate, since one must work in order to live. A tax on the efforts expended by one in order to live is slavery, albeit not 100% slavery as the person from whom tax is extracted is permitted to retain some of his labor for his own benefit. But then again, even slaves in the ordinary sense were allowed to eat some of the food they grew too and spend time providing for their own clothing and shelter needs or if they had that provided to them, compensatet for that expense from whatever labor they did expend, so even they were not 100% slaves either. The difference between that slavery and the slavery that exists today under the income tax as usually applied is only a difference in percentage with the added consideration that today's slaves are allowed to decide what labor they will do.

You'll have no dispute from me that regardless of its history or how we got to where we are to today, the end result is complete disaster and something the framers, had they foreseen what would come, would have taken any steps to avoid. They may well have taken pride in seeing the USA grow to the size it has, but would nonetheless have completely disowned it for what it has become. If the intent of the law is the force of the law, then the intent of the Constitution, at least in its original form, has been completely misconstrued today.

But to prevail against it, one must recognize its strengths as well as weaknesses. It is imperative to understand what the law is as written and enforced.

This is true.

It may not be worth laboring this matter further. One problem with taxing income is defining the word "income" which neither the Constitution nor the tax code ever does.

The early 1900's were not good times. I theorize that was in part due to it being run by a generation that did not know the nature of the war between the states or understand the concept of state sovereignty. They embraced a lot of things they should not have embraced, like a central bank.

Pinguinite.com

Neil McIver  posted on  2006-12-07   15:20:04 ET  Reply   Trace   Private Reply  

One problem with taxing income is defining the word "income" which neither the Constitution nor the tax code ever does.

Just to be clear, it is defined. See EISNER v. MACOMBER , 252 U.S. 189 (1920) in my post #110 above, definition is underlined and in boldface, and see the consequent elaboration of income definitions in Title 26 in nolu_chan's post #95. And yes, Title 26 is law.

The IRS invariably attempts to expand the definitions, most recently attempting to include compensation for damage awards (05-5139 Murphy v IRS, wherein the government lost on appeal and is seeking a re-hearing and Murphy is objecting and SCOTUS has already denied cert to one other appellant based on Murphy) and these definitions do evolve, but make no mistake, they are defined.

It may not be worth laboring this matter further.

Seemingly not.

I will at some point post my thoughts on Banister, as requesed.

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-07   16:14:26 ET  Reply   Trace   Private Reply  

Just to be clear, it is defined.

A couple SC decisions do define it, including Flint, I think it is, which defines income as gains, profits and so forth (but not including wages). Title 26 does define "Gross Income" in terms of "income", and "Taxable income" in terms of "Gross Income" but does not define the single word "income" alone. In my previous claim I said the Constitution nor the IRC defined income, which excludes SC decisions, and I'll stick to that. Whether a trade of labor for something of equal value constitutes gain is one point of contention as arguably there is no profit or gain when one makes an equal value trade.

I will at some point post my thoughts on Banister, as requesed.

Thank you. I would appreciate seeing that, as so far as I know, Banister's position largely overlaps that of SAPF. The first chapter of Banister's report, BTW, can be downloaded from his site, http://freedomabovefortune.com. He does solicit information in exchange for this download, but he says compliance is voluntary.

Pinguinite.com

Neil McIver  posted on  2006-12-07   17:12:51 ET  Reply   Trace   Private Reply  

A couple SC decisions do define it, including Flint, I think it is, which defines income as gains, profits and so forth (but not including wages). Title 26 does define "Gross Income" in terms of "income", and "Taxable income" in terms of "Gross Income" but does not define the single word "income" alone.

You are perhaps thinking of Glenshaw which affirms the Title 26 definitions:

COMMISSIONER v. GLENSHAW GLASS CO., 348 U.S. 426 (1955)

The sweeping scope of the controverted statute is readily apparent:

"SEC. 22. GROSS INCOME.

"(a) GENERAL DEFINITION. - `Gross income' includes gains, profits, and income derived from salaries, wages, or compensation for personal service . . . of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source whatever. . . ." (Emphasis added.)[Footnote 4]

This Court has frequently stated that this language was used by Congress to exert in this field "the full measure of its taxing power." Helvering v. Clifford, 309 U.S. 331, 334; Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216, 223; Douglas v. Willcuts, 296 U.S. 1, 9; Irwin v. Gavit, 268 U.S. 161, 166. Respondents contend that punitive damages, characterized as "windfalls" flowing from the culpable conduct of third parties, are not within the scope of the section. But Congress applied no limitations as to the source of taxable receipts, nor restrictive labels as to their nature. And the Court has given a liberal construction to this broad phraseology in recognition of the intention of Congress to tax all gains except those specifically exempted. Commissioner v. Jacobson, 336 U.S. 28, 49; Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 87-91. Thus, the fortuitous gain accruing to a lessor by reason of the forfeiture of a lessee's improvements on the rented property was taxed in Helvering v. Bruun, 309 U.S. 461. Cf. Robertson v. United States, 343 U.S. 711; Rutkin v. United States, 343 U.S. 130; United States v. Kirby Lumber Co., 284 U.S. 1. Such decisions demonstrate that we cannot but ascribe content to the catchall provision of 22 (a), "gains or profits and income derived from any source whatever." The importance of that phrase has been too frequently recognized since its first appearance in the Revenue Act of 1913[Footnote 5] to say now that it adds nothing to the meaning of "gross income."

[snip]

It therefore cannot be said with certitude that Congress intended to carve an exception out of 22 (a)'s pervasive coverage. Nor does the 1954 Code's[Footnote 9] legislative history, with its reiteration of the proposition that statutory gross income is "all-inclusive,"[Footnote 10] give support to respondent's position. The definition of gross income has been simplified, but no effect upon its present broad scope was intended.[Footnote 11] Certainly punitive damages cannot reasonably be classified as gifts, cf. Commissioner v. Jacobson, 336 U.S. 28, 47-52, nor do they come under any other exemption provision in the Code. We would do violence to the plain meaning of the statute and restrict a clear legislative attempt to bring the taxing power to bear upon all receipts constitutionally taxable were we to say that the payments in question here are not gross income. See Helvering v. Midland Mutual Life Ins. Co., supra, at 223.

Whether a trade of labor for something of equal value constitutes gain is one point of contention as arguably there is no profit or gain when one makes an equal value trade.

I think your real issue is that the government, law, and courts have always held that human labor has no basis, i.e., its cost to the worker is presumed zero, and hence 100% of what the worker receives as income is not offset by any basis or cost to the worker of doing the work. If a basis were recognized for human capital, then that basis could be used to reduce the taxable portion of the wage - it wouldn't be 100% gain. The difference between the human capital basis and the wage paid would be the smaller taxable portion. But a basis in human capital is yet to be recognized, but the Murphy case I linked above may begin to open a crack in that position.

In my previous claim I said the Constitution nor the IRC defined income, which excludes SC decisions, and I'll stick to that.

Well, sincerely Neil, you can stick to that story but it won't change what you'll face in court. The Constitution, as meta-law, doesn't define common terms; it doesn't define "arms" or "assembly" or "press" or "freedom", or "religion", "imports", "exports", "duties"... etc. These are all terms with common law definitions. To expect or require the Constitution to define them is unrealisitic. And as mentioned and cited repeatedly above, the laws, rulings, and tax code do define income, gross income, etc.

You have the last word, I'm really trying to just let this go :)

(The Gospel of Jesus Christ is the only true good news)

Starwind  posted on  2006-12-07   18:47:01 ET  Reply   Trace   Private Reply  

You have the last word, I'm really trying to just let this go :)

I got in way late in the thread, but I have to throw in my 2¢ worth.

I KNOW FOR A FACT that the Social Security system is VOLUNTARY!! And I KNOW FOR A FACT that it is possible to WITHDRAW from that system.

You can obtain a SS form 521 which is the form to WITHDRAW YOUR SS APPLICATION!!!

And I KNOW FOR A FACT that once you are out of the "system", you are then free from the income tax.

How do I know??? BECAUSE I HAVEN'T FILED A TAX RETURN OR MADE ANY TYPE OF INCOME TAX PAYMENT IN OVER 12 YEARS, AND NOT SO MUCH AS GOTTEN A LETTER FROM THEM...... And I know several people that withdrew from the SS, quit filing and paying taxes, and have not been contacted in any way by the IRS. One guy I know of has been out for over 23 years.

Now if you choose to participate in commercial activities like having a SS account, a bank account, a driver's license, a business license, a stock market account, etc then YOU WILL be subject to the rules and regulations of those activities - and that includes the "income tax"... That is a CHOICE you have to make.

Consider three economic sectors: public, private, and free. The public sector is the government or coercive sector - the master sector. The private sector consists of economic enterprises that obey and finance the masters and obtain "privileges" from them, like licenses, subsidies, tariff protection, government contracts, tax concessions, "supportive regulation," etc. This is the slave sector. It can also be called the victim sector. Enterprises in the victim /slave sector use "corporations" and other slave-structures. Consider a U.S. Supreme Court ruling still in effect:

"There is a clear distinction in this particular case between an individual and a corporation, and that the latter has no right to refuse to submit its books and papers for an examination at the suit of the State. The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no such duty to the State, since he receives nothing therefrom, beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the State, and can only be taken from him by due process of law, and in accordance with the constitution. Among his rights are a refusal to incriminate himself, and the immunity of himself and his property from arrest or seizure except under a warrant of the law. He owes nothing to the public so long as he does not trespass upon their rights.

Upon the other hand, the corporation is a creature of the State. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the State and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its charter." Hale v. Henkel, 201 U.S. 43 at 47 (1905).

People who conduct their economic affairs in accordance with Hale v. Henkel operate in the free sector - the real free-enterprise sector.

The modern day Social Security Act is codified at 42 U.S.C., sections 301-433. If there were a requirement that every American join the Social Security scheme, one would expect to find language in the act similar to the following: "Every American of the age of 18 years or older shall submit an application with the Social Security Administration and shall provide thereon the information required by regulations prescribed by the Secretary. Every member of Social Security shall pay the taxes imposed herein and records of such payments shall be kept by the Secretary for determining the amount of benefits to which such member is entitled hereunder." Amazingly, no such or similar language appears within the act, and particularly there is no section thereof which could remotely be considered as a mandate that anyone join Social Security. The closest section of the act which might relate to this point is the requirement that one seeking benefits under the act must apply for the same. But, this relates to an entirely different point than a requirement that one join.

Since the statutory scheme fails to impose such requirement, the next question to be asked is whether perhaps the Social Security regulations themselves might impose such duty. But here, the regulations are no broader than the act itself, and the duty to apply for and obtain a Social Security card or number boils down to the following found at 20 C.F.R., section 422.103:

"(b) Applying for a number. (1) Form SS-5. An individual needing a social security number may apply for one by filing a signed Form SS-5, 'Application for a Social Security Card,' at any social security office and submitting the required evidence...

"(2) Birth Registration Document. The Social Security Administration (SSA) may enter into an agreement with officials of a State... to establish, as part of the official birth registration process, a procedure to assist SSA in assigning social security numbers to newborn children. Where an agreement is in effect, a parent, as part of the official birth registration process, need not complete a Form SS-5 and may request that SSA assign a social security number to the newborn child.

"(c) How numbers are assigned. (1) Request on Form SS-5. If the applicant has completed a Form SS-5, the social security office... that receives the completed Form SS-5 will require the applicant to furnish documentary evidence... After review of the documentary evidence, the completed Form SS-5 is forwarded... to SSA's central office... If the electronic screening or other investigation does not disclose a previously assigned number, SSA's central office assigns a number and issues a social security number card...

"(2) Request on birth registration document. Where a parent has requested a social security number for a newborn child as part of an official birth registration process described in paragraph (b)(2) of this section, the State vital statistics office will electronically transmit the request to SSA's central office... Using this information, SSA will assign a number to the child and send the social security number card to the child at the mother's address."

The purported duty to apply for and obtain a Social Security number therefore boils down to this: you get it if you need it or request it. There is no legal compulsion to do so.

The bottom line is if you want to be in the private sector and be involved in commercial activities - YOU DO NOT HAVE RIGHTS!!!! You give them up in favor of the "priveleges" of the commercial activities.... If General Motors has it in their corporate charter that they will not hire anyone without a Social Security number, (they have every legal right to do this) and you want to work for GM, then you'd better go sign up. Then sit down, shut up, and pay your taxes!! Now if you're willing to take some $8/hr cash-under-the-table job, and do without a driver's license, or marriage license, or ANY license, and NOT be under ANY contractual agreement with the state (even things like having a bank account) - that's a whole different deal.

I get the feeling you want to find a way to legally get out of taxes, but still be able to write a check for the electric bill, and are willing to stand in line to renew your driver's license. Sorry, it don't work that way!!

No matter how noble the objectives of a government; if it blurs decency and kindness, cheapens human life, and breeds ill will and suspicion - it is an EVIL government. Eric Hoffer

innieway  posted on  2006-12-08   0:46:45 ET  Reply   Trace   Private Reply  

It sounds like the case you cite was only challenging whether punative awards were taxable without bringing to question the issue of the nature of the income tax as direct or indirect or with it's related limitations. Yes courts will only address points of contention before them. They will rarely make rulings in favor of one party or the other that were not raised by either, such as striking down a harsh sentence as violative of the 8th amendment that bars excessive penalties when the defense didn't even think to ask for it.

Brushaber/Stanton declare the income tax as indirect and as indirect it has limitations. If there are no limitations then why haven't those cases been overturned somewhere along the way? (That's a rhetorical question).

I think your real issue is that the government, law, and courts have always held that human labor has no basis, i.e., its cost to the worker is presumed zero, and hence 100% of what the worker receives as income is not offset by any basis or cost to the worker of doing the work.

Clearly the cost to provide labor is not zero. One expends calories to work which come from food we eat, and food comes at a price -- They didn't let me out of the supermarket without paying the last time I asked them. That doesn't even count the cost of cleaning work clothes and the cost of shelter within to rest in preparation for each day's work. Certainly if I were to build a robot that could do manual labor and started a business in sending it out to do work, It's recognized I would be able to deduct the full cost of maintenence needed to service the robot. Yet somehow the maintenence of natural persons that do the same thing are not deductable? No, labor clearly does not come at zero cost. No, I don't have a court case handy to back me up on that but it should instead be clear by the law of common sense.

But a basis in human capital is yet to be recognized, but the Murphy case I linked above may begin to open a crack in that position.

Any reprieve that can be obtained would be welcomed.

Well, sincerely Neil, you can stick to that story but it won't change what you'll face in court.

Certainly anyone taking on the IRS with positions I've outlined will have an uphill battle, but even these particular arguments aside, there are plenty more procedural issues which the routinely IRS fails to comply with in their procedures. Examples: Seizing one's bank account with a notice of lien instead of a lein: Failing to sign Substitute for Return for non-filers (All tax returns must be signed by someone to be executable, but IRS personel routinely execute unsigned SFR's in order to create an assessment) -- Accusing a non filer in criminal court of violating a penalty statute rather than the statute that requires him to file (one I did mention above); Failing to issue proper delegation of authority to IRS personel who summon persons to appear before them. Those off the top of my head, and I'm not even in to it as much as some are.

The things that take place in the courtroom are dubious as well. I think in Irwin Schiff's trial the jury asked the judge for a copy of the law which required him to file and the judge told them he wouldn't give it to them. For some reason they convicted him anyway. In the FtF DVD, a juror from another tax case describes the same thing happening, only they acquitted, and she described the judge as giving a rather livid reaction at the verdict. I've seen a copy of a pre-trial order denying defendants in a willfull failure to file tax case the ability to give any meaningful defense at all, including evidence related to the "willfulness" to commit a crime in not filing, which the SC has ruled must be present as one of the 3 necessary elements in sustaining a conviction.

That's why I say the courts today are pretty crooked.

I hear what you're staying, Star. You are basically echoing what pretty much any IRS/DOJ agent would say about income taxes, and doing so while lothing the income tax system. My take is this: If you are right and the 16th permitted congress to take a portion of any and every transaction ever made (given that every transaction at every level is income to at least one party, and since income doesn't have to be received in the form of money, argably every transaction is income to every party and if that sounds like I'm stretching things, consider what sales tax is) then this republic is already dead, and died for good in 1913. Because the power to tax is indeed, the power to destroy, and congress has it within it's legal means to destroy every person in the entire country.

You have the last word, I'm really trying to just let this go :)

I'm also trying to let it go and I was going to hold you to that but then ended up ranting too long. I'll let you have the mic as long as you promise not to post any more court case opinions or IRC references. How's that sound? ;^)

You are a tough guy, Star. Definitely gave me a run for my money. (No pun intended).

Pinguinite.com

Neil McIver  posted on  2006-12-08   4:01:54 ET  Reply   Trace   Private Reply  

I got in way late in the thread, but I have to throw in my 2¢ worth.

Dang, you are late. If Star's feeling the same way I do right now then he might just capitulate.

And I'm proposing a moratorium on quoting case law on this thread.

Pinguinite.com

Neil McIver  posted on  2006-12-08   4:12:26 ET  Reply   Trace   Private Reply  

No, I don't have a court case handy to back me up on that but it should instead be clear by the law of common sense.

To maintain a system of laws that are beyond the comprehension of the lawmaker, the law enforcemnt, and those allegedly subject to them is also beyond reason especially when they are described in the enforcement manual as:

"a system of self-assessment and voluntary compliance".

"Guard with jealous attention the public liberty. Suspect every one who approaches that jewel. Unfortunately, nothing will preserve it but downright force. When you give up that force, you are ruined."

Patrick Henry

noone222  posted on  2006-12-08   4:14:41 ET  Reply   Trace   Private Reply  

Comments (119 - 200) not displayed.

Top • Page Up • Full Thread • Page Down • Bottom/Latest

[Home]  [Headlines]  [Latest Articles]  [Latest Comments]  [Post]  [Sign-in]  [Mail]  [Setup]  [Help]