BRIEF ON
TAXATION
by
Charles F. Conces
At one point in history, most educated men believed that the world was
flat. Today, many lawyers and judges
believe that the 16th Amendment conferred a new taxing power on the
federal government. The second erroneous
belief is the subject of this Brief.
The taxing authorities are listed in the United States Constitution and
are clarified and explained by the United States Supreme Court.
In 1864, a tax act was passed that authorized taxation on an
individual’s portion of corporate earnings. The act did not impose a tax on the
non-corporate portion of the individual’s earnings.
“ (The) Income Tax Act of June 30, 1864 (chapter 173, 13 Stat.
223, 281, 282), under which this court held, in Collector v. Hubbard, 12 Wall.
1, 16, that an individual was taxable upon his proportion of the earnings of
the corporation although not declared as dividends. That decision was based
upon the very special language of a clause of section 117 of the act (13 Stat.
282) that 'the gains and profits of all companies, whether incorporated or
partnership, other than the companies specified in this section, shall be
included in estimating the annual gains, profits, or income of any person
entitled to the same, whether divided or otherwise.” SOUTHERN PAC CO. v. LOWE , 247 U.S.
330, 335 (1918).
In Butcher’s Union, the 10 years prior to Pollack, i.e. 1894, the U.S.
Supreme Court ruled: “The common business and callings of
life, the ordinary trades and pursuits, which are innocuous in themselves, and
have been followed in all communities from time immemorial, must therefore be
free in this country to all alike upon the same conditions. The right to pursue
them, without let or hinderance, except that which is
applied to all persons of the same age, sex, and condition, is a distinguishing
privilege of citizens of the United States, and an essential element of that
freedom which they claim as their birthright. It has been well said that 'the
property which every man has in his own labor, as it is the original foundation
of all other property, so it is the most sacred and inviolable. The patrimony
of the poor man lies in the strength and dexterity of his own hands, and to
hinder his employing this strength and dexterity in what manner he thinks
proper, without injury to his neighbor, is a plain violation of this most
sacred property. It is a manifest encroachment upon the just liberty both of
the workman and of those who might be disposed to employ him.” Butcher's Union Co. v. Cresent City
Co., 111 US 746 (1884).
“…
using of anything whereby any person or persons, bodies politic or
corporate, are sought to be restrained of any freedom or liberty they had
before or hindered in their lawful trade,' All grants of this kind are void at
common law, because they destroy the freedom of trade, discourage labor and
industry, restrain persons from getting an honest
livelihood, and put it in the power of the grantees to enhance the price of
commodities. They are void because they interfere with the liberty of the
individual to pursue a lawful trade or employment.” Butcher's Union Co. v. Cresent
City Co., 111 US 746, 756 (1884).
Taxation Key, West 53 – “The legislature cannot name
something to be a taxable privilege unless it is first a privilege.”
Taxation Key, West 933 – “The Right to
receive income or earnings is a right belonging to every person and realization
and receipts of income is therefore not a
"privilege that can be taxed".
Two years after the 16th
Amendment was passed, the Supreme Court ruled that it was unlawful to force any
employee to enter into any agreement as a condition of employment. Such
prohibition would also apply to the W-4 form.
“The court held it unconstitutional,
saying: 'The right to follow any lawful
vocation and to make contracts is as completely within the protection of the
Constitution as the right to hold property free from unwarranted seizure, or
the liberty to go when and where one will. One of the ways of obtaining
property is by contract. The right, therefore, to contract cannot be infringed
by the legislature without violating the letter and spirit of the Constitution.
Every citizen is protected in his right to work where and for whom he will. He
may select not only his employer, but also his associates.” COPPAGE v. STATE OF KANSAS, 236 U.S.
1, 23 -24 (1915).
“any
officer, agent, or receiver of such employer, who shall require any employee,
or any person seeking employment, as a condition of such employment, to enter
into an agreement, either written or verbal, …or shall threaten any employee
with loss of employment, or shall unjustly discriminate against any employee .
. . is hereby declared to be guilty of a misdemeanor, and, upon conviction
thereof . . . shall be punished for each offense by a fine…”. COPPAGE v. STATE OF KANSAS, 236 U.S.
1 (1915).
As recently as 1943, the U.S. Supreme Court ruled:
“A
state may not impose a charge for the enjoyment of a right granted by the
Federal Constitution.” MURDOCK v.
COMMONWEALTH OF PENNSYLVANIA, 319 US 105, at 113; 63 S Ct at 875; 87 L Ed at
1298 (1943).
A look at POLLOCK is crucial because, as Complainants shall show this
Honorable Court, the Complainants in this Criminal Complaint fall under the
ruling of POLLOCK and not under the 16th Amendment.
POLLACK v. FARMERS’ LOAN & TRUST CO., 157 US 429 (1895), addressed
the issue of direct taxes. The Court quoting the Constitution: “No capitation, or other direct, tax shall be laid, unless in
proportion to the census….” And,
“As to the states and their
municipalities, this (contributions to expense of government) is reached
largely through the imposition of direct taxes. As to the federal
government, it is attained in part through excises and indirect taxes upon
luxuries and consumption generally, to which direct taxation may be added to
the extent the rule of apportionment allows.”
Pollock v. Farmers’ Loan and Trust Co., 157 US 429,
629 (1895):
"Excise' is defined to be an
inland imposition, sometimes upon the consumption of the commodity, and
sometimes upon the retail sale; sometimes upon the manufacturer, and sometimes
upon the vendor.”
The Code of Federal Regulations cites direct and indirect
taxes in 19 CFR 351.102 Definitions:
Direct tax. ``Direct tax'' means a tax on wages, profits, interests, rents,
royalties, and all other forms of income, a tax on the ownership of real
property, or a social welfare charge.
Indirect tax. ``Indirect tax'' means a sales, excise, turnover, value
added, franchise, stamp, transfer, inventory, or equipment tax, a border tax,
or any other tax other than a direct tax or an import charge.
POLLOCK v. FARMERS’ LOAN & TRUST CO., 157 US 429, 436 -
441 (1895) on apportionment:
'Representatives and direct taxes
shall be apportioned among the several
states which may be included within this Union, according to their
respective numbers, which shall be determined by adding to the whole number of
free persons, including those bound to service for a term of years, and excluding Indians not taxed,
three-fifths of all other persons.' This was amended by the second section of
the fourteenth amendment, declared ratified
July 28, 1868, so that the whole number of persons in each state should be
counted, Indians not taxed excluded, and the
provision, as thus amended, remains in force. The
actual enumeration was prescribed to be made within three years after the first
meeting of congress, and within every subsequent term of ten years, in such
manner as should be directed.”
The enjoyment of the right to work
and earn a living existed long before the establishment of governments, and was
not taken away from citizens by this government.
In Knowlton v. Moore, the Supreme Court defined direct taxes.
Knowlton v. Moore, 178 US 41, 47 (1900):
"Direct Taxes bear upon persons,
upon possession and the enjoyment of
rights".
In 1921, eight years after the 16th Amendment was
passed, the Supreme Court stated:
“That the right to conduct a
lawful business, and thereby acquire pecuniary profits, is property,
is indisputable.” TRUAX v.
CORRIGAN, 257 U.S. 312, 348 (1921).
In 1923, ten years after the 16th Amendment was passed,
the court referred to numerous past rulings and the rights of the individual.
“While this court has not attempted
to define with exactness the liberty thus guaranteed, the term has received
much consideration and some of the included things have been definitely stated.
Without doubt, it denotes not merely freedom from bodily restraint but
also the right of the individual to contract, to engage in any of the
common occupations of life, to acquire useful knowledge, to marry,
establish a home and bring up children, to worship God according to the
dictates of his own conscience, and generally to enjoy those privileges long
recognized at common law as essential to the orderly pursuit of happiness by
free men. Slaughter-House Cases, 16 Wall. 36;
Butchers' Union Co. v. Crescent City Co ., 111
U.S. 746 , 4 Sup. Ct. 652; Yick Wo v. Hopkins, 118
U.S. 356 , 6 Sup. Ct. 1064; Minnesota v. Bar er, 136
U.S. 313 , 10 Sup. Ct. 862; Allegeyer
v. Louisiana, 165
U.S. 578 , 17 Sup. Ct. 427; Lochner v. New York, 198
U.S. 45 , 25 Sup. Ct. 539, 3 Ann. Cas. 1133; Twining v. New Jersey 211
U.S. 78 , 29 Sup. Ct. 14; Chicago, B. & Q. R.
R. v. McGuire, 219
U.S. 549 , 31 Sup. Ct. 259; Truax
v. Raich, 239
U.S. 33 , 36 Sup. Ct. 7, L. R. A. 1916D, 545, Ann.
Cas. 1917B, 283; Adams v.
Tanner, 224
U.S. 590 , 37 Sup. Ct. 662, L. R. A. 1917F, 1163,
Ann. Cas. 1917D, 973; New
York Life Ins. Co. v. Dodge, 246
U.S. 357 , 38 Sup. Ct. 337, Ann. Cas. 1918E, 593; Truax v. Corrigan, 257
U.S. 312 , 42 Sup. Ct. 124; Adkins v. Children's
Hospital (April 9, 1923), 261
U.S. 525 , 43 Sup. Ct. 394, 67 L. Ed. --; Wyeth v.
Cambridge Board of Health, 200 Mass. 474, 86 N. E. 925, 128 Am. St. Rep. 439,
23 L. R. A. (N. S.) 147.”
MEYER v. STATE OF NEBRASKA, 262 U.S. 390,
399 (1923).
Occupations of “Common right” are rights, not privileges.
In Sims v. Ahrens, 167 Ark. 557, 271 S.W. 720, 733
(1925):
"[T]he Legislature has no power
to declare as a privilege and tax for revenue purposes occupations that are of
common right, but it does have the power to declare as privileges and tax as such for
state revenue purposes those pursuits and occupations that are not matters of
common righ t..."
POLLOCK stated, “... that such
tax is a direct tax, and void because imposed without regard to the rule of
apportionment; and that by reason thereof the whole law is invalidated.” It is also stated in the U.S.
Constitution: Article 1, sec. 9, “No
Capitation, or other direct, Tax shall be laid, unless in proportion to the
Census or Enumeration herein before directed to be taken.” These two prohibitions and
limitations on federal taxing authority were never repealed and remain in force
in the main body of the Constitution.
Pollock also stated the intention of
the framers of the Constitution:
“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.” Pollock v. Farmers’ Loan and Trust
Co., 157 US 429, 582 (1895).
POLLOCK also ruled that the Constitution clearly recognized the two
classes of taxation: “Thus, in the matter of taxation, the
constitution recognizes the two great classes of direct and indirect taxes, and
lays down two rules by which their imposition must be governed, namely, the
rule of apportionment as to direct taxes, and the rule of uniformity as to
duties, imposts, and excises.” Pollock, 157 US 429, 556 (1895).
“From
the foregoing it is apparent (1) that the distinction between direct and
indirect taxation was well understood by the framers of the constitution and
those who adopted it; (2) that, under the state system of taxation, all taxes
on real estate or personal property or the
rents or income thereof were regarded as direct taxes; (3) that the rules of
apportionment and of uniformity were adopted in view of that distinction and
those systems…” Pollock, 157 US 429,
573.
The notion that a federal income tax where one person pays one amount
and another person pays nothing, was ruled against by
POLLOCK as having violated “apportionment”.
“The
income tax law under consideration is marked by discriminating features which
affect the whole law. It discriminates between those who receive an income of
$4,000 and those who do not. It thus vitiates, in my judgment, by this
arbitrary discrimination, the whole legislation.” Pollock, 157 US 429, 595.
Butcher’s Union and Pollock were in
complete agreement and not in contradiction. This was in sum, the relevant
taxing authority that was in existence in 1895. In 1898, the Supreme Court
spoke of the liberty guaranteed by the Constitution.
The "liberty"
guaranteed by the Constitution "must be interpreted in light of the common
law, the principles and history of which were familiarly known to the framers
of the Constitution. " U.S. v. Wong Kim Ark, 169
U.S. 649, 654 (1898).
In 1909, the Corporate Excise Tax Act
was passed and the U.S. Supreme Court ruled that this met the requirements of
the U.S. Constitution. There can be no question that the 1909 tax was passed in
order to impose on corporations, an “income tax”, placed on the privilege of
incorporation, and fell under the category of excise tax, and therefore was an
indirect tax, not subject to the rule of “apportionment”. Most U.S. citizens
are not subject to excises laid on corporate privileges.
In 1911, the U.S. Supreme Court confirmed definition of duties,
imposts, and excises and the taxing authority on corporate privileges in FLINT
v. STONE TRACY, 220 US 107, 151 - 152 (1911):
“Duties and imposts are terms
commonly applied to levies made by governments on the importation or
exportation of commodities. Excises are 'taxes laid upon the manufacture, sale,
or consumption of commodities within the country, upon licenses to pursue
certain occupations, and upon corporate privileges.' Cooley, Const. Lim. 7th ed.
680.”
In 1913, STRATTON’S INDEPENDENCE
addressed the intent of congress in passing the 16th Amendment,
while also addressing the corporate excise tax act of 1909.
STRATTON'S INDEPENDENCE, LTD. v.
HOWBERT, 231 U.S. 399, 417 (1913):
“Evidently Congress adopted the
income as the measure of the tax to be imposed with respect to the doing of
business in corporate form because it desired that the excise should be
imposed, approximately at least, with regard to the amount of benefit
presumably derived by such corporations from the current operations of the
government. In Flint v. Stone Tracy Co. 220 U.S. 107, 165 ,
55 S. L. ed. 107, 419, 31 Sup. Ct. Rep. 342, Ann. Cas. 1912 B. 1312, it was held that Congress, in
exercising the right to tax a legitimate subject of taxation as a franchise [231 U.S. 399, 417] or privilege, was not debarred
by the Constitution from measuring the taxation by the total income, although
derived in part from property which, considered by itself, was not taxable.”
The distinction between the carrying
on of business by a corporation, and the carrying on of business by the same
business when conducted by a private firms or individuals, was clearly stated:
“In the case at bar we have already
discussed the limitations which the Constitution imposes upon the right to
levy excise taxes, and it could not be said, even if the principles of the
14th Amendment were applicable to the present case, that there is no
substantial difference between the carrying on of business by the corporations
taxed, and the same business when conducted by a private firm or individual.
The thing taxed is not the mere dealing in merchandise, in which the actual
transactions may be the same, whether conducted by individuals or corporations,
but the tax is laid upon the privileges which exist in conducting business with
the advantages which inhere in the corporate capacity of those taxed, and which
are not enjoyed by private firms or individuals.” FLINT v. STONE TRACY CO., 220 U.S.
107, 162 (1911).
“As has
been repeatedly remarked, the corporation tax act of 1909 was not intended
to be and is not, in any proper sense, an income tax law. This court had
decided in the Pollock Case that the income tax law of 1894 amounted in effect
to a direct tax upon property, and was invalid because not apportioned
according to populations, as prescribed by the Constitution. The act of
1909 avoided this difficulty by imposing not an income tax, but an excise tax
upon the conduct of business in a corporate capacity, measuring, however, the
amount of tax by the income of the corporation. Flint v. Stone Tracy Co. 220
U.S. 107 , 55 L. ed. 389, 31 Sup. Ct. Rep. 342,
Ann. Cas. 1912 B, 1312; McCoach v. Minehill & S. H.
R. Co. 228
U.S. 295 , 57 L. ed. 842, 33 Sup. Ct. Rep. 419;
United States v. Whitridge (
decided at this term, 231
U.S. 144 , 58 L. ed. --, 34 Sup. Ct. Rep. 24.” STRATTON'S INDEPENDENCE, LTD. v. HOWBERT, 231
U.S. 399, 414 - 415 (1913).
STRATTON’S went on to say that corporations receive a government
conferred benefit and that such benefit could be taxed as a corporate
privilege.
“Corporations engaged in such business share in the benefits
of the federal government, and ought as reasonably to contribute to the support
of that government as corporations that conduct other kinds of profitable
business.”
“… the annual gains of such
corporations are certainly to be taken as income for the purpose of
measuring the amount of the tax.”
In 1916, the U.S. Supreme Court
confirmed once again that the 16th Amendment conferred no new taxing
powers in its ruling in 
STANTON v. BALTIC MINING CO., 240 US
103, 112 -114 (1916):
“Not being within the authority of the 16th
Amendment, the tax is therefore, within the ruling of Pollack… a direct tax and
void for want of compliance with the regulation of apportionment.”
“… 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..”
“… it was settled in Stratton’s
Independence… that such tax is not a tax upon property… but a true excise
levied on the result of the business..”
Also in 1916, the U.S. Supreme Court
confirmed prior rulings on the 16th Amendment:
BRUSHABER v. UNION PACIFIC R. CO., 240 US 1, 11 (1916):
“… the confusion is not inherent, but rather arises
from the conclusion that the 16th Amendment provides for a hitherto
unknown power of taxation; that is, a power to levy an income tax which,
although direct, should not be subject to the regulation of apportionment
applicable to all other direct taxes. And the far-reaching effect of this erroneous
assumption will be made clear by generalizing the many contentions advanced in
argument to support it ….”
In BRUSHABER,
the Court remarked on the confusion that would multiply if the contentions of
radical new taxing powers were acceded to:
BRUSHABER v. UNION PACIFIC R. CO., 240 US 1, 12
(1916):
“… the contentions under it (the 16th
Amendment), if acceded to, would cause one provision of the Constitution to
destroy another; that is, they would result in bringing the provisions of
the Amendment exempting a direct tax from apportionment into irreconcilable
conflict with the general requirement that all direct taxes be apportioned.
… This result, instead of simplifying the situation and making clear the
limitations on the taxing power … would create radical and destructive changes
in our constitutional system and multiply confusion.”
BRUSHABER v. UNION PACIFIC R. CO., 240 US 1, 12, 18 (1916): went on to rule on the purpose of the 16th
Amendment and the necessity of maintaining and harmonizing the 16th
Amendment with the “apportionment” requirements:
“… the whole purpose of the
Amendment was to relieve all income taxes when imposed from apportionment
from a consideration of the source …”
“… on the contrary shows that it was
drawn with the object of maintaining the limitations of the Constitution and
harmonizing their operation.”
In 19
18, the High Court confirmed prior decisions in PECK v. LOWE,
247 US 165, 173 (1918):
The
Sixteenth Amendment, although referred to in argument, has no real bearing and
may be put out of view. As pointed out in recent decisions, it does not
extend the taxing power to new or excepted subjects …”
In 1918, the U.S. Supreme Court once
again addressed taxation authorized under the 16th Amendment.
“ (The) Income Tax Act of June 30, 1864
(chapter 173, 13 Stat. 223, 281, 282), under which this court held, in
Collector v. Hubbard, 12 Wall. 1, 16, that an individual was taxable upon
his proportion of the earnings of the corporation although not declared as
dividends. That decision was based upon the very special language of a clause
of section 117 of the act (13 Stat. 282) that 'the gains and profits of all
companies, whether incorporated or partnership, other than the companies
specified in this section, shall be included in estimating the annual gains,
profits, or income of any person entitled to the same, whether divided or
otherwise.' The act of 1913 contains no similar language, but on the contrary
deals with dividends as a particular item of income, leaving them free from
the normal tax imposed upon individuals, subjecting them to the graduated
surtaxes only when received as dividends (38 Stat. 167, paragraph B), and
subjecting the interest of an individual shareholder in the undivided gains and
profits of his corporation to these taxes only in case the company is formed or
fraudulently availed of for the purpose of preventing the imposition of such
tax by permitting gains and profits to accumulate instead of being divided or
distributed.” SOUTHERN PAC CO. v. LOWE , 247 U.S. 330 (1918).
In Doyle v. Mitchell Bros., 247 U.S. 179,
183 (1918):
"An
examination of these and other provisions of the Act (Corporation Excise Tax Act of August
5, 1909) make it plain that the legislative purpose was not to tax property
as such, or the mere conversion of property, but to tax the conduct of the
business of corporations organized for profit upon the gainful returns from
their business operations."
SOUTHERN PACIFIC CO. v. LOWE, 247 U.S. 330, 335 (1918) ruled that
everything that comes in, cannot necessarily be
included in “income”:
"We
must reject in this case, as we have rejected in cases arising under the
Corporation Excise Tax Act of 1909, the broad contention submitted on behalf of
the government that all receipts, everything that comes in, are income within
the proper definition of the term 'gross income'. Certainly the term
'income' has no broader meaning in the Income Tax Act of 1913 than in that of
1909, and for the present purpose we assume there is no difference in its
meaning as used in the two acts."
In EISNER v. MACOMBER, 252 US 189, 205 - 206 (1920), the High Court
confirmed prior rulings:
“The 16th 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.”
“As repeatedly held, this did not extend the taxing power to
new subjects…”
“…it becomes essential to distinguish between what is and is
not ‘income’, as the term is there used..”
“…we find little to add to the succinct definition adopted
in two cases arising under the Corporation Tax Act of 1909…(Stratton’s
and Doyle)”
EISNER v. MACOMBER also ruled that congress cannot change the
definition of “income”:
“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.”
In 1920, the U.S. Supreme Court ruled on the compensation as being not
subject to tax in EVANS v. GORE, 253 US 245 (1920):
“If the
tax in respect of his compensation be prohibited, it can find no justification
in the taxation of other income as to which there is no prohibition; for, of
course, doing what the Constitution permits gives no license to do what it
prohibits.”
EVANS further ruled that the 16th
Amendment did not authorize new taxing powers over subjects and the government
agreed that this was so:
“Does the Sixteenth Amendment authorize and support this tax
and the attendant diminution; that is to say, does it bring within the taxing
powers subjects theretofore excepted? The court below answered in the negative; and counsel for the government say: ‘It is not, in view of recent decisions,
contended that this amendment rendered anything taxable as income that was not
so taxable before’.”
BOWERS v. KERBAUGH-EMPIRE CO., 271 U.S. 170, 174
(1926):
“The
Sixteenth Amendment declares that Congress shall have power to levy and collect
taxes on income, 'from whatever source
derived' without apportionment among the several states, and without regard to
any census or enumeration. It was not the purpose or effect of that
amendment to bring any new subject within the taxing power.”
INCOME
In 1921, the U.S. Supreme Court ruled on the definition of the word
“income” in MERCHANTS’ LOAN & TRUST CO. v. SMIETANKA, 255 US 509, 518 - 519
(1921):
“The Corporation Excise Tax Act of August 5, 1909, was not
an income tax law, but a definition of the word ‘income’ was so necessary in
its administration…”
“It is obvious that these decisions in principle rule
the case at bar if the word ‘income’ has the same meaning in the Income
Tax Act of 1913 that it had in the Corporation Excise Tax Act of 1909, and that
it has the same scope of meaning was in effect decided in Southern Pacific v. Lowe…,
where it was assumed for the purpose of decision that there was no difference
in its meaning as used in the act of 1909 and in the Income Tax Act of 1913.
There can be no doubt that the word must be given the same meaning and content
in the Income Tax Acts of 1916 and 1917 that it had in the act of 1913. When we
add to this, Eisner v. Macomber…the definition of ‘income’
which was applied was adopted from Stratton’s Independence v. Howbert, supra, arising under the Corporation Excise Tax
Act of 1909… there would seem to be no room to doubt that the word must be
given the same meaning in all the Income Tax Acts of Congress that was given to
it in the Corporation Excise Tax Act, and that what that meaning is has now
become definitely settled by decisions of this Court.”
The High Court, in SMIETANKA, seemed as if it had become exasperated
that the question of the definition of the word “income” had repeatedly been
raised.
The word “income” has been wrongfully used by the IRS, as including the
wages, compensation, or earnings of the Plaintiffs, when not engaged as a
corporate enterprise. In Doyle v. Mitchell, the U.S. Supreme Court made the
clear and unequivocal statement:
“Whatever
difficulty there may be about a precise and scientific definition of 'income,'
it imports, as used here, something entirely distinct from principal or capital
either as a subject of taxation or as a measure of the tax; conveying rather
the idea of gain or increase arising from corporate activities.” DOYLE v. MITCHELL BROS. CO. , 247
U.S. 179, 185 (1918).
The general public, being unaware of the legal definition of “income”
in the constitutional sense, has been misled into a wrongful use of the word
and has been also misled into believing that they had “income’, although not
participating in a government conferred corporate benefit.
Once again in Bowers v. Kerbaugh-Empire, 271
U.S. 170, 175 (1926):
"Income
has been taken to mean the same thing as used in the Corporation Excise Tax Act
of 1909, in the 16th Amendment, and in the various revenue acts subsequently
passed."
In TAFT v. BOWERS, 278 U.S. 470, 481 (1929),
the Court ruled:
“The Sixteenth Amendment provides:
“'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.'
“Income is the thing which may be taxed-income from
any source. The amendment does not attempt to define income or to designate how
taxes may be laid thereon, or how they may be enforced.
“Under former decisions here the settled doctrine
is that the Sixteenth Amendment confers no power upon Congress to define and
tax as income without apportionment something which theretofore could not have
been properly regarded as income.”
In 1930, 1943, and 1960, the courts still understood the
meaning of the word “income”
and the legitimate taxation thereof:
Redfield v. Fisher, 135 Or. 180, 292 P. 813, 819 (Ore. 1930): "The
individual, unlike the corporation, cannot be taxed for the mere privilege of
existing. The corporation is an artificial entity which owes its existence and
charter powers to the state; but the individual's rights to live and own
property are natural rights for the enjoyment of which an excise cannot be
imposed."
Jerome H. Sheip
Co. v. Amos, 100 Fla. 863, 130 So. 699, 705 (1930):
"A man is free to lay hand upon his own property. To acquire
and possess property is a right, not a privilege ... The right to acquire and
possess property cannot alone be made the subject of an excise
.... nor, generally speaking, can an excise be laid upon the mere
right to possess the fruits thereof, as that right is the chief attribute of
ownership."
Jack Cole Co. v. MacFarland, 337
S.W.2d 453, 455-56 (Tenn. 1960): "Realizing
and receiving income or earnings is not a privilege that can be taxed…Since
the right to receive income or earnings is a right belonging to every person,
this right cannot be taxed as a privilege."
“Income
is necessarily the product of the joint efforts of the state and the recipient
of the income, the state furnishing the protection necessary to enable the
recipient to produce, receive, and enjoy it, and a tax thereon in the last
analysis is simply a portion cut from the income and appropriated by the state
as its share…” Sims v. Ahrens et al., 271 SW Reporter
at 730.
In 1943, HELVERING v. EDISON BROTHERS' STORES, 8 Cir. 133 F2d 575 (1943)
ruled on the limitation of the definition of “income”:
"The
Treasury cannot by interpretive regulation make income of that which is not
income within the meaning of the revenue acts of Congress, nor can Congress,
without apportionment, tax that which is not income within the meaning of
the 16th Amendment."
As late as 1960, the U.S. Supreme Court ruled in 
FLORA v. US, 362 US 145 (1960):
“Our system of taxation is based upon voluntary assessment
and payment, not upon distraint.”
The definition of distraint in the legal dictionary, “to seize a person’s
goods as security for an obligation.”
In 1976, in U.S. v. BALLARD, 535 F2d 400: “Gross income and not ‘gross receipts’ is the foundation of
income tax liability…” BALLARD gives us two useful explanations:
At 404, “The general term ‘income’ is not defined in the Internal Revenue Code.” At 404, BALLARD further ruled that “… ‘gross
income’ means the total sales, less the cost of goods sold, plus any income
from investments and from incidental or outside operations or sources.”
Thus, it is shown by these U.S. Supreme Court rulings that most U.S.
citizens did not have “income” as the meaning of the word is intended in the 16th
Amendment.
If it is true that the U.S. Congress and the U.S. Supreme Court did not
know of the above court rulings or had forgotten those rulings existed, then
why did the U.S. Supreme Court rule in 1988 the following:
“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. 10 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).” SOUTH CAROLINA v.
BAKER, 485 U.S. 505 (1988).
The Inferior Courts of the United States must face up to the
inescapable conclusions that follow. Even if those conclusions find that there
has been massive fraud perpetrated on the American people since the end of the
Second World War, when the emergency war tax expired and the American people
could no longer be said to be liable for a direct un-apportioned tax. The
Congress of the United States must also take responsibility for its share of
this scandalous and massive fraud, wherein people’s lives, families, jobs,
reputations, and livelihoods have been destroyed by that monstrous organization
called the Internal Revenue Service.
INESCAPABLE
CONCLUSIONS
The individual income tax is a direct
tax subject to apportionment.
The corporate ‘income’ tax is an
indirect tax (excise tax), not subject to apportionment. Plaintiffs are not
subject to excises laid on corporate privileges.
The 16th amendment only
applies to ‘income’ as defined by the US Supreme Court, as pertaining only to
corporations and government conferred privileges.
Occupations of “common right” cannot
be hindered and are rights of freedom necessarily covered by the common law of
the U.S. Constitution.
The word ‘income’ is not defined in the Internal Revenue
Code.
The 16th amendment did not authorize any new
taxing powers.
The taxing powers of the federal government were the same
after the passage of the 16th amendment as were existent before the
passage.
The IRS agents are guilty of fraud by refusing to respond to
questions from Plaintiffs, according to court ruling precedence.
The 16th amendment kept the corporate excise tax
in the category of indirect tax and did not affect the apportionment
requirement of the Constitution.
Brief prepared and researched by
Charles F. Conces. Precedence law is on the public record and is
admissible in courts.
Dated
______________, 2005.
___________________________________
Charles F. Conces