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Hard Evidence That Form 1040 Has NO Legal Basis (pg. 4)
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| DJMaytag |
| quote: | Originally posted by Yoepus
It does, and your argument would be that since taxes make you sad they should be outlawed?:conf |
They don't make me sad (Federal taxes), since I am not liable to pay them. I am sad, however, that many are not aware that they are paying a tax that they are not liable for.
| quote: | Originally posted by Yoepus
Umm yes. In the bill of rights preferably too. |
You must not understand the premise of the Bill of Rights...
The BOR is what WE THE PEOPLE tell government it cannot do, like restrict our speech, take away our guns, etc. It doesn't work the other way around, the government does NOT grant us rights.
| quote: | Originally posted by Yoepus
The government taxes children, property, food, and air (via EPA), and books and informaiton services. If these are all "rights" where is the moral or legal argument against taxation of these things? |
I'm afraid you have this all wrong. The STATE (whichever one you're in) can and most do tax some of these things. Sales taxes on these things are pretty obvious, and yearly property (land) assessments all go to the state coffers, which is within their limits (AFAIK) to do because of the 10th Amendment.
I know of no tax on children though. Air is a bit iffy too.
| quote: | Originally posted by Yoepus
Guess what? So can a US citizen. |
How is one to make a living then? Sure, we could have 100% unemployment and watch what the government does with only it's Constitutional revenue stream. I'd find that amusing to see, as it'd be the same thing that would happen if everyone woke up to the income tax scam.
| quote: | Originally posted by Yoepus
But income tax is an indirect tax, not a direct tax, if it was a direct tax that would be a problem, hence the 16th amendment. |
The subjects and activites associated with the incomes that are allowed to be taxed are indeed an indirect tax, as they cannot be avoided.
| quote: | Originally posted by Yoepus
I don't get it, you agree to the fact that Congress has the constitutional ability to tax incomes yet then go on to argue why Congress has no constitutional ability to do so.
So which is it, can Congress tax incomes or not?
I'm just trying to get some agreemenet here at the macro level before diving into the micro. |
How many times do I need to write it? Yes, the government has the right to tax incomes, but it's taxing jurisdiction prevents it from taxing EVERYONE's income. The "source derived" is where the activities that are allowed to be taxed come into play. When looking at it when it says "from whatever source derived", does NOT mean any and every source.
Digest that for a bit, and I'll get into more of this with you, as it really has to be taken piecemeal. |
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| ogvh5150 |
| quote: | Originally posted by DJMaytag
No, they're going to have to do the research on it like I did. I can only hope to post stuff here and provide the spark like someone did for me to start questioning what's really going on. |
My original thought before my previous post. |
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| occrider |
While Pollock does create a constitutional issue with income taxation, that does not mean that it was a very good ruling. Which is, in part, the reason why it has been universally ignored by both the courts and the legislature. Warning. This is going to be a long read:
Purging Out Pollock:
The Constitutionality of Federal
Wealth or Sales Tax
Professor Erik Jensen argues that Congress may not tax wealth and may not adopt a national sales or consumption tax.1 The apportionment clauses of the Constitution say that federal "direct taxes" must be apportioned among the states according to their population.2 Apportionment according to population is a hobbling requirement, somewhere between utterly silly and impossible for any tax base that is uneven per capita among the states. Apportionment yields not fair results but perverse results. As a practical matter if apportionment is required, the tax is impossible. The Sixteenth Amendment to the Constitution, ratified in 1913, was written to allow Congress to tax income without the hobbling apportionment requirement. Professor Jensen says that the adopters of the Sixteenth Amendment knew the difference between an income tax and a tax on consumption or on wealth3 so the fact that the Amendment frees only "income" from the apportionment requirement means that federal consumption and wealth taxes are excluded. The Treasury Department is currently considering proposals to replace the federal income tax with a national sales or consumption tax.4 A federal tax on wealth has recently been proposed to pay for capital grants to young adults.5 Jensen casts thunderbolts in both directions, making both wealth and consumption taxes impossible or just short of impossible.
Professor Jensen's argument on the Sixteenth Amendment would not matter, unless one presumes, inappropriately, that the Supreme Court's 5-4 decision in Pollock v. Farmers' Loan & Trust6 in 1895 was rightly decided and remains good law.7 The case law that preceded Pollock, going back to the Founders, had held that apportionment was not written to hobble federal taxation so that the governing principle was that no tax would be considered to be an apportionable "direct tax" if apportionment of the tax was unreasonable. Pollock ripped up the pre-existing law so as to veto the income tax. Pollock was itself overturned by the Sixteenth Amendment as to apportionment of income, but if Pollock's destruction of the prior law and resurrection of apportionment remains as a sound principle, notwithstanding all that has happened to Pollock since, then apportionment can be used as a tool to veto other federal taxes, as Professor Jensen would indeed use it.
Pollock was, however, wrong when decided, and has been properly beaten back by the Court, the Congress, and the People. At this point Pollock, if not strictly reversed, is such a moribund case that a puff of breath will blow it out. It would clean up the law a bit for the Supreme Court to declare that Pollock stands reversed in full, leaving intact the wise case law that preceded it. Clean, clear law is indeed a virtue. Still, in the meantime, Pollock should not matter much. One should not erect an edifice or a legal argument on a foundation as crumbling as Pollock. Without Pollock, an unapportioned federal tax on wealth or on sales or consumption is perfectly constitutional.
The Glory of Hylton
Article I, sections 8 and 9 of the Constitution requires that capitation and other "direct taxes" must be apportioned among the states according to their population, counting slaves as three- fifths of a free citizen. Apportionment is a vestige of the requisition rule under the Articles of Confederation, which preceded the Constitution. Under the Articles, Congress had no tax power of its own and almost no employees and could raise revenue only by telling a state to pay over its quota of a requisition. The formula used to determine each state's quota was an attempt to measure the relative wealth of the states. Congress could get no more accurate appraisals of wealth of the states than their population, especially under the wartime conditions when the quota system was first adopted. Counting slaves as three-fifths was a hard-fought compromise over how much slaves should be considered as contributing to the wealth of a state.8 As John Adams said in July 1776, the numbers of people were taken by the apportionment rule as "an index of the wealth of the state" and "not as subjects of taxation."9 "Population" was adopted in the Convention and justified in the ratification debates because it was the "best measure of wealth."10
Apportionment among states by population was brought into the Constitution only because it taxed slaves, counting the slaves at three-fifths of a person. Apportionment of tax became part of the Constitution in the course of the debates over how much slaves should affect voting power in the House of Representatives. In those debates, the North protested that slaveholders should not get more voting power by buying more slaves.11 The North acquiesced in slaves increasing slaveholders' voting power only once it was decided that additional slaves would also increase the South's share of a requisition, or a tax in lieu of requisition that bypassed the states and taxed individuals directly.12 Apportionment of direct tax was written to increase tax on the South because of their slaves, not to protect wealth from tax. With the end of slavery, apportionment lost its original rationale.
Apportionment of direct tax turned out to be a rule too silly to enforce, in those cases in which the tax base is not equal per capita among the states. In Hylton v. United States,13 in 1796, the Court looked at a carriage tax, for instance, which was a perfectly legitimate and common tax of the times. Carriages, however, are an urban vehicle and New York, the Court assumed, might have 10 times more carriages per capita than Virginia.14 To meet apportionment under those circumstances, tax rates would have to be 10 times higher on carriages in Virginia than in New York. Indeed, the poor fool to drive the first carriage into Kentucky would have to bear Kentucky's entire state quota. There is and never was any rhyme or reason for why Virginian or Kentuckians should pay higher rates on their carriages, although that result is forced by the rule of apportionment. The Founders just did not see it when they adopted the rule.15
Apportionment is still too silly a rule to enforce. Connecticut has about twice the per capita wealth and consumption of Mississippi.16 An apportioned federal tax on consumption or wealth would mean that Mississippians would have to pay tax at twice as high tax rates as Connecticut citizens. The results are adverse to reason and policy, but are forced by apportionment by state. Under apportionment Mississippians would need to pay tax at twice the rates because they are relatively poor and have so little tax base over which to apportion their quota. The Founders misunderstood the effect and thought that apportionment would protect the poorer states.17
In the 1658 case of James v. Morgan,18 James convinced Morgan to buy a horse for a price equal to one barleycorn doubled for each nail in the horse's hooves. That formula turned out to yield more barley than existed in all of England. The court gave Morgan the horse, but for the price of only the fair market value of the horse. While the parties understood the English words in the contract in some sense, and Morgan agreed to the words, the contract as applied turned out to be too silly to enforce. Apportionment, where the tax base is uneven per capita among the states, is like a contract for one barleycorn, doubled per nail.19
In the debates over ratification of the Constitution "direct tax" had often been used as a synonym for all "internal taxes." "Indirect tax" was in turn a synonym for the "impost," that is, the tax at the water's edge on imports.20 "Dry taxes" were "direct taxes."21 The leading Anti-Federalist spokesmen, including Brutus,22 Federal Farmer,23 and Minority of the Pennsylvania Convention24 used "direct tax" as a term that included all internal or dry land taxes. The leading Federalist spokesmen, including James Madison,25 James Wilson,26 and Alexander Hamilton27 did too. Jefferson, who wavered on the Constitution, also used "direct" and "internal" tax as synonyms.28 "Direct" also meant "not through the states." The Articles of Confederation had allowed the Congress only requisitions on the states, taxing people or things indirectly, but the Constitution was to allow Congress to bypass the state and tax people and things directly. "Direct tax" commonly referred to the taxes the states would have used to meet a requisition, except that under the new Constitution the Congress could borrow the state tax base or tax in the same way that the state had taxed and collected the taxes directly. Carriage taxes were on Treasury's 1796 inventory of state or "direct tax," compiled to allow an apportionment of federal internal taxes among the states.29
The Court in Hylton held that apportionment would not be required where apportionment was not reasonable. Notwithstanding how "direct tax" was used in the ratification debates, the court in Hylton avoided apportionment by defining "direct tax" creatively. Alexander Hamilton argued on behalf of the government in Hylton that the federal tax on carriages was not a direct tax because "no construction ought to prevail calculated to defeat the express and necessary authority of the government." "It would be contrary to reason," he said, "and to every rule of sound construction, to adopt a principle for regulating the exercise of a clear constitutional power which would defeat the exercise of the power."30 The argument had been critical to Congress's adoption of the carriage tax.31 The Supreme Court agreed with the argument:
The Constitution evidently contemplated no taxes as direct taxes but only such as Congress could lay in proportion to the census. The rule of apportionment is only to be adopted in such cases where it can reasonably apply; and the subject taxed, must ever determine the application of the rule.32
Alternatively stated, "[a]s all direct taxes must be apportioned, it is evident that the Constitution contemplated none as direct but such as could be apportioned."33 A tax on carriages was deemed to be not a direct tax as a matter of law so that it would not have to be apportioned.
The Justices who decided Hylton were James Wilson, William Paterson, Samuel Chase, and James Iredell, all of whom were major players in the debates on tax and federal power leading up the Constitution.34 They knew the Constitution far better than we do. When Hylton was decided, giants still walked upon the earth and they served as the Justices in Hylton.
Hylton was of course properly decided. Jensen treats Anti-Federalist arguments that lost by the adoption of the Constitution as if they were the arguments of the Federalists who wrote the text of the Constitution and won. The Anti-Federalists hated giving direct or internal tax to the federal government more than any other aspect of the Constitution. The Anti-Federalists generally conceded that the new federal government could have the impost or tax on imports, but none of them wanted the federal government to have the power to lay internal or dry taxes. To render the Congress "safe and proper," Anti-Federalist James Monroe argued, "I would take from it one power only -- I mean that of direct taxation."35 The hardest fought issue of the ratification debates had been the fight over Anti-Federalists' attempts to deny the federal government any power to lay direct tax. The Federalists, however, had fought back and victoriously passed a Constitution that gave the federal government the power to lay direct taxes.36 The Federalists who wrote the Constitution defeated the attempts to veto or hobble direct tax.
The proponents of the Constitution described the power of direct tax as properly unhobbled. Hamilton argued for the power of government over direct tax in the New York ratification convention, saying
A constitution cannot set bounds to a nation's wants; it ought not, therefore, to set bounds to its resources. Unexpected invasions, long and ruinous wars, may demand all the possible abilities of the country. Shall not your government have power to call these abilities into action? The contingencies of society are not reducible to calculations. They cannot be fixed or bounded, even in imagination.37
War was said to be increasingly a matter settled by the purse and not the sword, argued Oliver Ellsworth in Connecticut. A government that could command only a fraction of its resources for revenue, he said, was "like a man with but one arm to defend [him]self."38 In time of war, an enemy with a powerful navy could cut off revenue from the impost by an effective blockade: "Take direct taxation from the list of federal authorities," said Madison, and Virginia will be open to "surprize and devastation whenever an enemy powerful at Sea chuses to invade her."39 More generally, the first purpose of the Constitution was to solve a fiscal crisis, the destitution of the federal level, and to allow the federal government to raise enough revenue to pay off the Revolutionary War debts. When war came again, as the Founders expected, the federal government would have had to borrow again.40
George Washington told Thomas Jefferson he would embrace any tolerable compromise and would not have much objection to any of the suggested amendments except for the amendment that goes to the prevention of direct taxation and that one, he presumed, would be the amendment most strenuously insisted on.41 Washington's stubborn refusal to allow anything that goes to the prevention of direct taxation represents the Founders' intent.
The hard-fought debate over direct tax was a debate over a tax that on its face was subject to apportionment. The fight over federal power to lay direct tax arose long after the Philadelphia convention had added apportionment for reasons that had nothing to do with any reservations about whether federal direct tax was a good idea or not. The Anti-Federalists did not see apportionment as directed to or meeting their concerns and they did not adopt apportionment as their own. Neither side understood the purpose of apportionment was to restrain or hobble a federal tax or to make it absurd. No important player at the time knew or understood the absurdity of apportionment when the tax base is not even among the states.
The wisdom of Hylton was good law for a hundred years. In 1868, for example, the Supreme Court held that a Civil War tax on the income and principal of insurance companies was constitutional although not apportioned. The tax was not direct because the consequence of finding that apportionment was required was unacceptable:
The consequences, which would follow the apportionment of the tax . . . in the manner prescribed by the Constitution, must not be overlooked. They are very obvious. Where [insurance] corporations are numerous and rich, it might be light; where none exist, it could not be collected; where they are few and poor, it would fall upon them with such weight as to involve annihilation. It cannot be supposed that the framers of the Constitution intended that any tax should be apportioned, the collection of which on that principle would be attended with such results. The consequences are fatal to the proposition.42
In 1875, in Scholey v. Rew,43 the Court held on the same logic that a tax on wealth transmitted at death was not direct because
[i]f all taxes that political economists regard as direct taxes should be held to fall within those words in the Constitution, Congress would be deprived of the practical power to impose such taxes, and the taxing power would be . . . crippled; for no Congress would dare to apportion, for instance, the income tax.44
Finally, in Springer v. United States,45 in 1881, the Court held that Civil War income tax on individuals was not direct on the logic and authority of Hylton:
It was well held [in Hylton ] that where such evils would attend the apportionment of a tax, the Constitution could not have intended that an apportionment should be made. This view applies with even greater force to the [income] tax in question in this case. Where the population is large and the incomes are few and small, it would be intolerably oppressive.46
Pollock Comes Into the Garden
In 1895, in Pollock v. Farmers' Loan & Trust Co.,47 the Supreme Court overruled Hylton and its successors by a 5-4 margin so as to require that federal tax on income had to be apportioned. Apportionment is silly for an income tax because per capita income is not equal among the states and apportionment may, in fact, be impossible because for many citizens it is not even possible to ascertain which state quota various tax payments should be credited to. The Supreme Court did not seem unpleased by making a federal tax impossible. The majority made up a false history and rationale for the apportionment rule, saying that it was designed "to prevent an attack upon accumulated property by mere force of numbers."48 Justice Field announced, apocalyptically, that the income tax's
assault upon capital is but the beginning. It will be but the stepping-stone to others, larger and more sweeping, till our political contests will become a war of the poor against the rich, -- a war constantly growing in intensity and bitterness. 'If the court sanctions the [graduated income tax], "it will mark the hour when the sure decadence of our present government will commence."49
Apportionment, the majority opinion said, was "one of the bulwarks of private rights and private property."50
While "preventing a tax on accumulated wealth" might well capture the intent of the Justices in Pollock, that intent turns the historical meaning of the apportionment formula on its head. Apportionment in original meaning was a means to reach individual wealth by taxing according to relative wealth of the states. The Founders believed in wealth taxes. The land tax was a major wealth tax for the period, and the Founders wrote the Constitution to be able to reach wealth.51 When Hamilton asked Madison, for instance, for recommendations about what taxes the new government should impose, Madison advised a federal tax on land, as "an essential branch of national revenue . . . before a preoccupancy by the States becomes an impediment."52 The Founders often expressed sympathy with the aristocratic notion that those "who own the country should govern it,"53 but even within that viewpoint, the conclusion was that those who own the country should pay its tax.
Pollock itself seems to be a victim of misleading textualism. The text says that tax of a certain kind must be apportioned among the states according to population. The Justices reverse engineered from the text to create a rationale that the purpose must have been to protect wealthy states from populous states. That rationale created a right, in the Court's mind. When the income tax came into effect, after the Sixteenth Amendment, three- quarters of the revenue from the income tax, given its exemptions, would come from just eight rich states. New York alone would come to pay 35 percent of the income tax.54 If rich states had a right to avoid tax, the right cried for a remedy and repelled narrow interpretations that might deny the right.
The difficulty is that both the rationale and the consequent right are entirely made-up history. The Founders treated population solely as the measure of wealth, so that in historically accurate thinking, the wealthy and the populous states were the same, within the margin of error. Apportionment was intended to reach wealth. Pollock got the historical meaning of the apportionment clause exactly upside down. The Hylton court, overruled in Pollock, understood the history.
In Pollock, the Court also concluded that the purpose of the apportionment requirement was to prevent the imposition of tax within a single state by overall national majority: "Nothing can be clearer than that what the Constitution intended to guard against was the exercise by the general government of the power of directly taxing persons and property within any State through a majority made up from the other States."55 This language makes no sense at all within the constitutional system. An overall majority in the House and Senate can adopt federal taxes, and the apportionment requirement does nothing to change that. There is no requirement that a state must agree to a federal tax for individuals within the state to be subject to the tax and there is no immunity from federal tax if a majority within a state would vote against the tax. The Constitution, more generally, did not give each state some kind of Calhounian veto on legislation. The Constitution created not a compact among states, but a federal government resting directly on the sovereignty of the people and able to raise revenue directly from people and transactions without approval by the states.
States are not even rights-bearing entities under the Constitution. The Articles of Confederation had been a compact among states, signed by delegates representing sovereign states.56 The Constitution replaces the Articles with a government drawing its legitimacy from the sovereignty of the people, and able to operate and draw revenue without recourse to the states.57 States are artificial entities, without rights of their own, and they are not even a very good proxy for individual rights. A concept of equity among states that necessarily requires Mississippi residents to pay tax at twice the rate of Connecticut residents and could put the whole of a state's quota on a single carriage driver cannot be justified as a vindication of equity or rights on the individual level.
The Withering of Pollock in the Supreme Court
Pollock was bad history when it was decided and it quickly became a pariah and shrank in importance. As Senator Joseph Bailey of Texas said in the debate over the Sixteenth Amendment, "an overwhelming majority of the best legal opinion in this Republic believes that Pollock was erroneous."58 An article in the Harvard Law Review expressed faith that "the strong consensus of opinion of the legal profession will work out the right:"59
When a court of last resort not only overrules in effect three direct adjudications made by itself, but also refines away to the vanishing point two other of its decisions, and thereby cripples an important and necessary power and function of a coordinate branch of the government, and delivers an opinion in which is laid down a doctrine that is contrary to what has been accepted as law for nearly one hundred years, it is neither improper nor unprofessional carefully and earnestly to scrutinize that decision and the authorities and reasons upon which it is founded.60
The five-man majority were "nullifying judges" who ought to be impeached, wrote the former governor of Oregon.61 Justice Harlan described Pollock at the time as the "decision [that] will become as hateful with the American people as the Dred Scott case."62
Both Court and politics attacked Pollock and both beat back the Pollock doctrine wherever it mattered. Almost immediately the Supreme Court began retreating from what it later called its "mistaken theory" in Pollock,63 by expanding the definition of "excise tax" elastically so that it could take over almost the entire world of tax. In the constitutional debates, apportionable direct tax had been commonly defined to include "excise taxes."64 If you know the secret that apportioned taxes cannot have uniform tax rates, however, then you can deduce that excise taxes are excluded from the definition of apportionable direct taxes, because excise taxes have to have uniform tax rates across the nation.65
Whether excluded or not in the debates, at the time of the Constitution, "excise tax" referred first to the whiskey tax66 and beyond whiskey, it referred only to sin and luxury taxes, enacted to suppress vice and encourage good morals.67 In reaction to Pollock, however, the Court expanded "excise" way beyond its original meaning. Four years after Pollock, the Court held that a trade tax on the Chicago Board of Trade was an excise tax.68 Five years after Pollock, in 1900, the Court held that the graduated estate tax was an excise tax.69 If the 1895 Pollock Court had thought that it could protect accumulated capital from an assault by Congress, the Court's decision in 1900 that Congress could enact a graduated estate tax terminated that rationale. In 1904, the Supreme Court said that a tax on the gross receipts of a corporation was an excise tax that did not have to be apportioned.70 That decision, in turn, justified a tax on the net income of a corporation, although the decision did not come down until 1911, after Congress had passed the Sixteenth Amendment.71 A tax on corporate business receipts or a corporate income tax is no less an assault on accumulated wealth than an individual income tax is. By 1929, the Court summarized the excise tax exemption as allowing "a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership" without apportionment.72
None of these taxes bears any resemblance to the whiskey tax or other taxes on vice, which was the meaning of "excise" in the constitutional period. The use-versus-mere-ownership rationale did not arise until after the constitutional period, and only once the Congress had realized that apportionment was a hobble, and so was seeking to invent narrow definitions of "direct tax."73 The excise cases are all heroic expansions of what an "excise" originally meant. Still, even though the excise tax cases represent opportunistic use of words to limit Pollock to its facts, the excise cases are properly decided because it was Pollock itself that was illegitimate.
The only remaining important tax that the Court's containment of Pollock left as an apportionable tax, by the time of consideration of the Sixteenth Amendment, was the individual income tax itself. The Sixteenth Amendment, proposed by Congress in 1909 and ratified in 1913 overrules Pollock in that last important redoubt.
The Political Assault on Pollock
Pollock was pushed back not just by the Supreme Court but also by the other branches of the federal government and by the states. In the presidential campaign of 1896, which immediately followed Pollock, the Democratic and Populist parties had sought to reverse Pollock. The Republican candidate, William McKinley, however, wanted high tariffs to protect American products from foreign competition in domestic markets, and had no interest in a graduated income tax, and it was McKinley who won the election.74 When McKinley was assassinated, however, his vice president and successor, Theodore Roosevelt, favored a graduated inheritance tax and also a graduated income tax: "The man of great wealth," Roosevelt told Congress, "owes a peculiar obligation to the State, because he derives special advantages from the mere existence of government."75 In 1908, the Republican candidate was Roosevelt's nominee, William Howard Taft, and both Taft and his Democratic opponent, William Jennings Bryan, supported a progressive income tax at least in emergencies. Both the Republican and Democratic candidates announced that Pollock was wrongly decided.76 During the Taft administration, Congress passed what became the Sixteenth Amendment, which allows an income tax without apportionment, for ratification by the states.
The movement for an income tax took the position that the Supreme Court might allow an income tax, if Congress just passed it again, by distinguishing or reversing Pollock. The Democratic platform supporting William Jennings Bryan in 1896 said that it was the duty of Congress to use all its constitutional power "which remains, or which may come to it by reversal" so that burden of tax shall not be borne entirely by the poor.77 The Populist Party platform said that Pollock was a misinterpretation of the Constitution.78 Cordell Hull of Tennessee (later Secretary of State) was an important instigator for the income tax in the House of Representatives and he said that Pollock was a "palpably erroneous decision stripping a coordinate body of the Government of one its strong arms of power and duty."79 "It seems inconceivable to me," Hull wrote, "that we had a Constitution that would shelter the chief proportion of wealth of the country from the only effective method of reaching it for its fair share of tax."80 Hull thought that a court would allow an individual income tax. After all if the corporate tax could be justified as a tax on doing business as a corporation, then an individual tax on income could be justified as a tax on doing business as an individual.81 The excise taxes on stock trades, gross receipts of a corporation, and estates surely already had very little resemblance to a whiskey tax, so that "excise tax" looked like it was an infinitely malleable term useful to avoid apportionment.
Professor Jensen argues that the reversal of Pollock by constitutional amendment rather than by a challenging reenactment of the income tax must be understood as an affirmation that the income tax was a direct tax, and that apportionment would be necessary absent an amendment.82 That is not how the amendment was understood at the time.
First, from the beginning, the movement for an income tax had two parallel remedies, one to challenge the Court and force it to retreat, and the other to respect the Court as institution and go for amendment of the Constitution. Which remedy to take was solely a matter of tactics, within the same overall purpose to defeat Pollock. Theodore Roosevelt's State of the Union address in 1906 said that Pollock might be reversed in full, but that an amendment would follow if it were not:
As the law now stands it is undoubtedly difficult to devise a national income tax which shall be constitutional. But whether is absolutely impossible is another question and if possible it is certainly desirable. . . . The question is undoubtedly very intricate, delicate and troublesome. The decision of the court was only reached by one majority. . . . Nevertheless, the difficulty evidently felt by the court as a whole in coming to a conclusion, when considered with all the prior decisions on the subject, may indicate the possibility of devising a constitutional income-tax law which substantially accomplishes the results aimed at . . . but if this fails, there will ultimately be no alternative to a constitutional amendment.83
Hull told the House of Representatives that it was the duty of Congress "to invoke every remedy at its command for the restoration of that lost [taxing] power" including both a reenactment of an income tax and an amendment.84 His assessment after the fact was that "the two proposals [for amendment or for challenging the Supreme Court] contributed to the success of each other."85
The decision to go for an amendment to the Constitution rather than pass an income tax bill to invite the Court to find another distinction from Pollock or to reverse it was explained at the time as arising from respect for the Supreme Court as an institution, and not as a means of giving respect to the erroneous Pollock decision. Roosevelt, while energetically opposing Pollock on its law and policy, said nonetheless that Pollock "is the law of the land, and of course accepted as such and loyally obeyed by all good citizens."86 President Taft's influence ultimately decided the tactical course and his choice was defended as a matter of respect for the Supreme Court. Taft's tax package included both an immediate income tax on corporations and also an amendment to the Constitution for an income tax on individuals:
I prefer an income tax, but the truth is that I am afraid of the discussion which will follow and the criticism which will ensue if there is another serious division in the Supreme Court on the subject of the income tax. Nothing has ever injured the prestige of the Supreme Court more than [ Pollock ] and I think many of the most violent advocates of the income tax will be glad of the substitution [of a corporation tax] for same reason. I am going to push the Constitutional Amendment, which will admit an income tax without question, but I am afraid of it without such an amendment.87
In the same vein, Taft wrote that "I am really in favor of an income tax, but I fear the Court would follow the Pollock case and declare it unconstitutional, and I do not desire that."88
The Senate Finance Committee decided that "it would be indelicate, at least, for the Congress of the United States to pass another measure and ask the Supreme Court to pass on it, when they had already passed on the proposition."89 Edward Whitney argued in the Harvard Law Review that the Court in Pollock had weakened the confidence of the people in the Judiciary and made the "Constitution plastic on all points," but that a second overruling would further undermine the Court, "even to restore the Constitution as originally defined."90 If, moreover, the Court refused to distinguish or overrule Pollock invalidated the income tax again, the public outrage would threaten the institution as a whole. In the end, the Congress decided not to challenge the authority or majesty of the Supreme Court, while reversing Pollock on its holding that an unapportioned income tax was unconstitutional.
The tactical choice to go for the amendment can also not be interpreted as affirmation of Pollock in part because there is crossing between the two parties in which the stronger advocates of the income tax pushed for amendment while the less fervent supporters pushed for court-challenging re-enactment of the income tax. In the presidential election of 1908, for example, Democrat William Jennings Bryan supported an amendment to the Constitution on the ground that it seemed improbable that the Congress could circumvent the Supreme Court's objections to an income tax.91 The Democratic platform of 1908 called only for an amendment.92 Republican Taft was on the other side in the 1908 campaign. While he later changed his mind to avoid challenging the Supreme Court, in 1908, Taft's position was that "it is not free from doubt how the Supreme Court, with changed membership, would view a new income tax law."93 Taft, in his acceptance speech for the Republican nomination, said that he believed in an income tax "which, under the decisions of the Supreme Court, will conform to the Constitution."94 Neither party was closely wedded to one side or the other of the tactical decision as to whether to go for an amendment or not.
Congress, in proposing the Sixteenth Amendment, also rejected language that could have confirmed the holding of Pollock that the income tax was a direct tax. Senator Norris Brown of Nebraska first offered a resolution that "Congress shall have power to lay and collect direct taxes on incomes without apportionment among the several States according to population."95 That language would have confirmed Pollock in treating the income tax as a direct tax that would need to be apportioned without the amendment. The language adopted by the Sixteenth Amendment, however, is that Congress shall have power to lay and collect taxes on incomes from whatever source, without apportionment, and that language does not confirm Pollock. The change, rejecting Brown's language, is relevant evidence that Congress, in proposing the amendment, did not mean to treat the income tax as direct, and did not mean to make taxes, that fell just outside the definition of income, as taxes that failed for want of apportionment.
The states that ratified the Sixteenth Amendment, finally, also did not understand they were confirming Pollock. In New Jersey, for example, then Governor Woodrow Wilson told the state assembly that Pollock was an erroneous decision, based on "erroneous economic reasoning."96 The ratifiers understood that the amendment came to bury Pollock, not to praise it.
Pollock shares with Dred Scott97 and Chisholm v. Georgia98 the dubious honor of being a court decision over-ruled by a constitutional amendment. A constitutional amendment requires two-thirds of both houses and three quarters of the states to be effective. Constitutional amendments require such a high level of consensus of the country that they are not technical documents or even lawyers' documents, but floods. The proposal for the Sixteenth Amendment passed almost unanimously in the House and Senate.99 No doubt, as Hull said, the old guard gave the appearance of acquiescing while in fact wanting the amendment to be defeated,100 but the old guard did largely acquiesce to the proposal. John D. Rockefeller announced that "[w]hen a man has accumulated a sum of money within the law . . . , the people no longer have any right to share in the earnings resulting from that accumulation."101 Rockefeller proved wrong as a matter of descriptive constitutional law. In the end, even the wealthiest states whose citizens would pay disproportionately more of the income tax supported the amendment.102
When the Sixteenth Amendment was proposed, the individual income tax was the last important tax still at issue. The Court had already allowed the "assaults on capital" in the form of estate tax, a tax on gross receipts of a corporation and a stock-trade tax and in 1911 it would affirm Congress's judgment that a tax on corporate income could also avoid apportionment. Politics is the art of the possible, although it is not always conceptually neat. Putting unnecessary coverage into the Sixteenth Amendment would have imperiled its passage, under the extraordinary high level necessary for a constitutional amendment without helping on the apparently last tax that the Court had not freed from apportionment, the graduated income tax itself.
Pollock in the Modern Era
Pollock was not completely overruled by the rapid expansion of the definition of "excise tax" to cover the assaults on wealth, that is, the corporate income tax, the estate tax, and the stock transfer tax. The Supreme Court, however, found that every tax that came before it in the 20 years after Pollock was an excise tax. Given its rapid expansion, "excise" should be understood as a malleable concept that a Court can use to avoid apportionment. Similarly, Pollock was not technically overruled by the Sixteenth Amendment, which covered only an income tax.103 Still, "income" too is a malleable concept that a court can use to avoid apportionment. It is possible that we could go on for some time, always distinguishing Pollock to avoid apportionment of whatever tax is under consideration. Manipulation of the terms "excise," "duty," and "income" to avoid apportionment might be legal fictions if the terms are held to their original meaning, but legal fictions can be sufficient tools to reach the right result.
Indeed, not only can the courts avoid apportionment by manipulative expansion of such terms as "duty," "excise," and "income, but they have a duty to do so, for the reasons expressed in Hylton. Apportionment is a silly and hobbling requirement, as the Founders recognized in Hylton, when the tax base is uneven. The Founders intended that the federal government should have the power to tax equitably. Apportionment of taxes where the tax base is uneven per capita among the states does not help equity or further any rational goal, it is just perverse. No court should ever again veto any federal tax, by imposing the apportionment requirement, now that the original purpose of apportionment, to tax slaves, has no remaining life. After the Sixteenth Amendment and the expansion of "excise tax," Pollock is too bad an egg, a terrible example of judicial bad behavior that now serves mainly as a warning to a court as a precedent to avoid.
Given that Pollock should never be followed again, it is time to reverse it in full to return to the case law, derived from Hylton, that preceded Pollock. Justice Oliver Wendell Holmes Jr., the "Great Dissenter," showed his wisdom by saying that "[t]he known purpose of this [Sixteenth] amendment was to get rid of nice questions as to what might be direct taxes."104 Consistently, Professor Thomas Reed Powell wrote that the public understood the Sixteenth Amendment to be a recall of the Pollock decision that restored what had gone before.105 Pollock has been beaten back by the Supreme Court, by the other two branches of the federal government, and by the states that ratified the Sixteenth Amendment. Apportionment, where the tax base is uneven, is too perverse to ever be applied again. Enough is enough.
http://www.taxhistory.org/thp/readi...cc?OpenDocument
In other words, if Pollock became a problem it would in all liklihood be reversed as it stands on weak ground. |
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| Shakka |
| Are you ing kidding me? |
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| DJMaytag |
Very interesting read Occ, I had to read it a couple times already. I may have to go back again to fully digest it, as I'm still not sure how to take that info. Either way, I realized that the constitutional aspect of this topic is a moot point.
The Constitution is the law that the government is held to, how it has to behave. The law (ie US Code) is what WE THE PEOPLE are held to.
Regardless of the constitutional aspect of whether it says the government (or Congress, if you want to get technical) can collect taxes on income, they still have to put it in writing in law to be able to do so. The ability to do something is completely different than actuall doing it.
I still have yet to find where in Title 26 of the US Code that it is a requirement to make a tax return and pay taxes. I still have yet to find where it is in there that makes you liable to pay taxes. Many, many others are in the same boat.
Has anyone else found it yet? |
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| Trancer-X |
Slaves to the Tax State
by Kirby R. Cundiff
The basis of communism is "From each according to his abilities to each according to his needs," a slogan that is the basis of a totalitarian society where neither life nor property is secure. The slogan shows itself in other ways too: when the communist manifesto was published in 1848, the second bullet point was a progressive tax system. The progressive tax system and the philosophy behind it, on the surface, seems to be the basis for the U.S. tax code today.
In 2004 individuals with a taxable income over $319,000 pay 35% of their marginal taxable income to the federal government whereas individual making $10,000 pay only 15% to the federal government. As offensive as I find this system, it is not the basis for taxation in the United States today. The real U.S. system is far worse.
The real basis for the U.S. tax code is the federal government taxes absolutely everything that it can, but responds to the abilities of powerful individuals and corporations to leave the system. This results in a maximum tax rate, not for the rich, but for the upper middle class, and a maximum tax rate, not for the nation's largest corporations, but for the medium sized ones.
An extremely obvious example of this is the corporate tax schedule. Corporations making over $18,333,333 pay 35% of their marginal taxable income to the federal government. Corporations making less money, for example $15,000,000, pay a larger fraction of their marginal income to the federal government, 38%.
The system is similar for individuals. I have the income of an average American taxpayer. On a marginal basis, I pay 25% of my income to the federal government, 6.75% to the state in which I live and 6.2% to the social security system and 1.45% to Medicare, putting me in about the 40% marginal tax bracket. Bill Gates tax bracket is well below 15%. Bill Gates and most wealthy Americans make the majority of their money off of capital gains, not earned income.
The maximum long-term capital gains tax rate is 15% and this is only paid when stocks are sold. The net effect is Bill Gates, and other Billionaire's, wealth grows largely tax-free while people whose primary source of income is labor pay 40% or more of their income to the government in taxes.
Federal income tax complications such as the alternative minimum tax, which is affecting more and more middle class Americans, make this problem even worse. The effect of this tax system is to make the rich richer relative to the middle class. The only way the middle class can join the wealthy is by starting and selling companies or by very astute stock selection. Working hard at a job will only result in the government taking most of your money.
Another blatantly regressive tax system is the social security system. As of tax year 2004 Americans pay 6.2% of their income below $87,900 into social security -- the tax rate above $87,900 is 0%. This is the largest tax many lower-income Americans pay. While it does tax middle class and lower income individuals at a much higher rate than high income individuals, the net effect is to make the total federal individual income tax brackets choppy like the federal corporate income tax brackets.
As of 2004, ignoring deductions since they make the tax system even more complicated, individuals making $85,000 per year are in a federal plus FICA plus Medicare tax bracket of 35.65%. This tax rate goes down to 29.45% if they make over $87,900 and then up to 34.45% if they make over $146,750. The federal total tax burden peaks at 36.45% for individuals making over $319,000 per year. It is hard to rationalize this sort of a system with any progress tax rate argument.
What are the reasons for this system? The "rich" have more options than the rest of us. They have lobbying power with the federal government, and perhaps more importantly they can leave the U.S. Tax system. They could, for example, move to Germany and give up their U.S. citizenship as emerging markets investment manager J. Mark Mobius did.
The capital gains tax in Germany, as well as many other countries, is zero. The U.S. must keep its capital gains tax rate somewhat low, or many wealthy Americans, and their capital would flow to other lower tax countries. Most Americans do not have the option of fleeing from high tax America; they must go where their jobs take them. This is the same reason that governments give special tax breaks to corporations to locate within their state or city. The corporations have the option of locating in many different places; their employees must go where the jobs are.
The only real check on the federal government raising income taxes on working Americans is the one the U.S. government realized during the Kennedy Era; slaves are not generally very productive workers. Before 1963, the top marginal tax rate in the United States was 91%. If the government taxes its populace at a 0% tax rate, it does not raise any money, but if it taxes its workers at a 100% tax rate, it does not raise much money either – why work when you get no rewards for it.
The theory of supply side economics and the Laffer curve drove federal marginal tax rates from 91% in 1963 down to 28% when Ronald Reagan left office. Since more people were willing to stay in the work force, the federal government's tax revenues drastically increased due to these tax cutes.
Unfortunately, the federal government's spending increased even more during the same time period. While the theory of supply side economics, and the federal government's desire for more revenue, was used to drive taxes lower during the Reagan era, it is unlikely to drive income taxes significantly lower today. It would be hard to argue that George W. Bush's top federal marginal tax rate cut from 39.6% to 35% will change many workers' behavior.
It is very likely that for the foreseeable future the extremely wealthy in the United States will have a much lower tax burden than the average American. One possible solution to this problem would be tax treaties between governments to create a worldwide uniform tax code to eliminate what has been called "unfair tax competition." I am sure that this is the solution that most governments would favor since they could then raise taxes on all of us without any competitive limits: the cartelization of the looter class.
Another solution, which I strongly favor, is lower taxes for everyone, especially the middle class. After all, the US currently has an higher individual tax rate than most every former communist society, including Russia and Vietnam. Surely we can do better.
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Kirby R. Cundiff, Ph.D. [[email protected]] is an Associate Professor of Finance at Northeastern State University in Tulsa, OK.
http://www.mises.org/story/1796 |
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| ogvh5150 |
| quote: | Originally posted by ogvh5150
What people fail to realize is that the Constitution does not apply to the IRS since they use the US Code Title 26 and therefore expects John Q. Public to use the same. And since Johnny is expected to peform under 26 IRC it becomes de facto as opposed to de jure. |
The point here is to remove Commercial law and use Common law. |
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| shaolin_Z |
| Holy crap occ. That's probably the longest post I've ever seen.:p |
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| DJMaytag |
| quote: | Originally posted by ogvh5150
The point here is to remove Commercial law and use Common law. |
Care to expand on that a bit? I'm not sure I'm following you on this comment and what you quoted yourself on.
As far as "Johnny being expected to perform under 26 IRC", how can he be expected to do so if he doesn't know what's IN "26 IRC" (Title 26 of the US Code). Now that I know (or know what's NOT in there), I believe that there is nothing for me to perform in my current situation. Should I start engaging in activities that are listed in Title 26, then I will pay every cent that I am liable for. |
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| ogvh5150 |
| quote: | Originally posted by DJMaytag
Care to expand on that a bit? I'm not sure I'm following you on this comment and what you quoted yourself on. |
Anyone can argue the Constitution in a courtroom but the de facto is the US Code.
There are many people out there that refer to this as Maritine Law or Commercial Law. You'd have to look up information from a man called Freeman. Aside from that, a good law dictionary like Black's or Bouvier's would be a good tool.
| quote: |
As far as "Johnny being expected to perform under 26 IRC", how can he be expected to do so if he doesn't know what's IN "26 IRC" (Title 26 of the US Code). Now that I know (or know what's NOT in there), I believe that there is nothing for me to perform in my current situation. Should I start engaging in activities that are listed in Title 26, then I will pay every cent that I am liable for. |
Ignorance is not going to be a get out of jail free card. I don't mean you, just in general. What happens with statements like that is people rely on the media to be their lawgivers and subsequentially their doom.
By performing, I mean if the de facto is 26 USC, then you are bound to it. What you misconceive is that I am saying for you to abide by it's nature, albeit an errant one, the answer is no. That is why people have to read it themselves to see what exactly it means and not go off on some rants like others have been posting here on why THEY HAVE TO pay income taxes because Uncle Sam says so.
This is why I post Hilter quotes. No one thinks, they just act on impulses of the mind they think belongs to them. A sad tale of so called independent thought. |
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| DJMaytag |
| quote: | Originally posted by ogvh5150
Anyone can argue the Constitution in a courtroom but the de facto is the US Code. |
In regards to taxes, arguing the Constitution would give the IRS a slam dunk case against you, as it would easily prove that you knowingly tried to circumvent the law. From everything I'd read and believe, there is nothing in the Constitution that I disagree with. That is not where the answer lies.
| quote: | Originally posted by ogvh5150
Ignorance is not going to be a get out of jail free card. I don't mean you, just in general. What happens with statements like that is people rely on the media to be their lawgivers and subsequentially their doom.
By performing, I mean if the de facto is 26 USC, then you are bound to it. What you misconceive is that I am saying for you to abide by it's nature, albeit an errant one, the answer is no. That is why people have to read it themselves to see what exactly it means and not go off on some rants like others have been posting here on why THEY HAVE TO pay income taxes because Uncle Sam says so.
This is why I post Hilter quotes. No one thinks, they just act on impulses of the mind they think belongs to them. A sad tale of so called independent thought. |
While I do ask the question of "Where is it in Title 26 that shows that I am liable?", it is merely a rhetorical question to get those to do the research for themselves.
I am not personally ignorant on the issue, as I have done the research of reading thru the text of Title 26 (a long and boring process for sure). While I have read the info from others in this regard, I am NOT blindly following what they say without doing the research myself. At the same time, I sure as hell am not following the conventional wisdom that says that you have to pay taxes just because everyone else is.
I have no problem with Title 26 being the defacto law and I will abide by any tax therein that I am liable for. Thus far, I have seen no activity that I am engaged in that would make me liable IN THAT SECTION OF THE US CODE (for example, Social Security lies elsewhere, in Title 42). |
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