Definition of Income

[Shoonra]

The 16th Amendment authorized Congress to impose a tax on income, without regard as to whether it was called direct, indirect, excise, or anything else. A tax upon income is authorized by the 16th Amendment and characterizing it in some technical way cannot undo that.

The legislative history shows that the the Amendment was deliberately intended to reach and tax income, and that, by income, the Amendment meant the rather obvious and ordinary meaning of money coming to a taxpayer, without regard (as the Amendment said explicitly) to its source.

[mertensv16]

Farmer, it'd be nice if you could engage in a civil debate without resorting to namecalling, but maybe that's all you have to offer.

I was responding to BobT's post that not only misrepresented what the Supreme Court held but also implied that the income of "those who work for a living" isn't taxable and that the holding of Brushaber was somehow limited to corporate income. Indago's brief post suggested that he felt that an income tax on individuals was an unauthorized direct tax. If either of these claims were true (which they're not), it would mean that somehow the 16th Amendment changed prior law to narrow Congress' taxing power.

But I'm glad you agree that the income tax is an indirect tax that needn't be apportioned, although your statement that "the source still needs to be taxable" seems like a qualification. Given that the Constitution says there's only one thing Congress can't tax (exports), what other "sources" would be nontaxable?

[indago]

mertensv16 wrote:

Look, the Supreme Court held in 1880 (33 years before the 16th Amendment) that an income tax on personal earnings was an indirect tax and was constitutional. See Springer v. U.S., 102 U.S. 586 (1880). This case has never been overruled and is still good law.

Professor Edward S. Corwin stated, in introduction to Senate Document No. 92-82, The Constitution of the United States of America, Analysis and Interpretation, published by the Congressional Research Department of the Library of Congress, concerning the opinion of the United States Supreme Court in the case of Pollock v Farmers' Loan & Trust Co., "...the Court accepted Mr. Joseph Choate's invitation to 'correct a century of error'." Mr. Choate, arguing before the Supreme Court of the United States as attorney for appellants Mr. Charles Pollock and Mr. Lewis H. Hyde, noted that government had argued that there was a tax which was in character somewhere between the direct tax and the indirect tax; a tax which did not require apportionment to the States, nor uniformity throughout the country; and that such a tax had been imposed upon the States' inhabitants now and then for the past 100 years, recalling the case of Hylton v US. At issue in the Hylton case was a carriage tax levied upon carriages kept by persons for their personal use; a tax believed to have been proposed by Alexander Hamilton, then Secretary of the Treasury for the United States. Hamilton was a Federalist; the Federalists being known at the time as seeking to expand the powers of the federal government beyond the scope of the Constitution. It was argued by the federalists that a tax upon carriages could not be properly apportioned among the States because some States had fewer carriages than others, and, therefore, it could not be a direct tax, but was an indirect tax, or excise. Although the tax was to be imposed upon the carriage, it was known that the person who owned the carriage would be the one who would pay the tax. Constitutionalists argued, in the Congress, while the bill was heatedly debated, that the tax was, in fact, upon persons who owned such carriages, and was a direct tax upon the person, or his property, and was unconstitutional; direct taxes, under the Constitution of the United States, were to be apportioned to the States, and not the States' inhabitants. The Constitutionalists lost the argument, and the bill became law on 5 June 1794. James Madison had written to Thomas Jefferson: "This is another proof of the facility with which usurpation triumphs where there is a standing corps always on the watch for favorable conjunctures, and directed by the policy of dividing their honest but undiscerning adversaries."

In September 1794, when the tax was to be collected, Daniel L. Hylton, of Williamsburg, Virginia, along with many other prominent citizens of Virginia, refused to pay the tax, declaring that it was a direct tax and not imposed according to the Constitution of the United States. Mr. Hylton owned one carriage, and the tax upon this carriage was $8. The penalty for not paying the tax was a like amount of $8, making a demand by government of $16 upon Mr. Hylton. In order for a case to be brought through the federal court system to the Supreme Court of the United States, at that time, required, jurisdictionally, that the amount in controversy be not less than $2000. Alexander Hamilton, retired from his duties as Secretary of Treasury by the time the case was to be tried, and retained by government to defend the tax, proposed a legal fiction, making declaration that Mr. Hylton owned 125 carriages with a tax of $1000, and a penalty of $1000, for a total of $2000, to be discharged by payment of $16 to the government.

Argument was brought before the federal Circuit Court in Richmond, Virginia, 27 May 1795 in the case of United States v Daniel Lawrence Hylton. The Court being divided, consent was given that judgment be entered against Mr. Hylton for the benefit of Writ of Error to the Supreme Court of the United States for ultimate judgment. Arguments of counsel before the Supreme Court were not reported in the case, but a pamphlet, which propounded the arguments before the Circuit Court in Virginia, pro and con, was published. The appeals case before the federal Circuit Court was appellant Hylton v US; counsel for appellant being John Taylor of Virginia. He argued that a direct tax, generally, was one laid upon the person or his property, the person paying the tax directly to the payee, where a third person was not interposed between "the real payer and the payee" as in the case of the indirect taxes, or excises. To lay such a tax upon the person, and call it an excise tax, was an "Evasion of the intention of the Constitution by a subterfuge...". He argued that the definition of an excise tax that was used in England could not be used in the United States, for in England an excise tax was laid upon just about everything that everybody owned. The Constitution laid restrictions on the Congress concerning taxes, and specifically, the direct taxes, which were to be apportioned to the States to pay. He expressed an "awful suspicion" that since the new Carriage Tax would produce but a trivial sum, it had been enacted not for the money but to serve as a precedent for future use. He also argued that the American confederation "is not a compact of individuals, it is a compact of states." The Constitution's mandate for "a proportion between taxation, and representation" was framed in terms of states, not of individuals. Mr. Taylor argued that the Constitution "is not providing for an equality of taxation among individuals, in proportion to their revenue, but for an equality of taxation between states in proportion to numbers." "The sum of money necessary to be raised, and not the abstract notion of a tax is the thing to be apportioned." The object of the direct taxation clause in the Constitution had been "to secure an equal contribution between the states in proportion to numbers; a thing not only possible, but attainable with precision."

Mr. Taylor published his arguments concerning the carriage tax to gain further support for the Constitutional form of taxation and to stir the people into awareness concerning this most vital subject, of which little was known by the people at the time. Mr. Taylor then resigned as counsel for Mr. Hylton, advising that full argument before the Supreme Court should not be had in this case; that a Supreme Court decision without full argument would carry little weight, apparently believing that the Federalists would ultimately win the argument because of the power base that they had built up in government. Alexander Hamilton was retained by government as counsel for defendant, which was the government, and the government also retained counsel for Mr. Hylton to argue his case before the Supreme Court. Mr. Hylton tendered an agreement that the federal authorities would have complete control of the case, his object being the resolve of the Constitutional question involved, and not to delay payment of any tax owed. Alexander Hamilton's arguments before the Supreme Court won the case for the government, being mostly in rejection of Mr. Taylor's arguments, as shown by the notes of Mr. Hamilton. Justice Iredell wrote to his wife: "The day before yesterday Mr. Hamilton spoke in our Court, attended by the most crowded audience I ever saw there, both Houses of Congress being almost deserted on the occasion. Though he was in very ill health, he spoke with astonishing ability, and in a most pleasing manner, and was listened to with the profoundest attention. His speech lasted about three hours. It was on the question whether the carriage tax, as laid, was a constitutional one. In one part of it he affected me extremely. Having occasion to observe, how proper a subject it was for taxation, since it was a mere article of luxury, which a man might either use, or not, as was convenient to him..."

Three of six justices of the Supreme Court heard argument in the case and decided for the government. Mr. Taylor's "awful suspicion" was justified many times. The Hylton case was cited by government often to justify a direct tax laid upon the States' inhabitants by federal government, and called an excise tax.

Mr. Choate turned the tide in his argument before the Supreme Court of the United States in 1895. He argued that the tax that was being laid by government, in the Pollock case, was a direct tax, and must be apportioned according to the number of the population of the State. The Supreme Court of the United States agreed, and, as noted in Senate Document No. 92-82, "...corrected a century of error." John Taylor's arguments in the Hylton case had finally been vindicated after one hundred years. If the tax, in the Hylton case, had been laid upon the manufacturer of the carriage before the carriage was transferred to the purchaser, Mr. Hylton in this case, then the tax would truly have been an excise tax upon the corporation which produced the carriages, and not a direct tax upon Mr. Hylton, an inhabitant of the State of Virginia. The Federalists had performed a great disservice to the Constitution of the United States, and, at the same time, had usurped a greater power to the government, which eventually brought their downfall through the election of Thomas Jefferson into the office of President of the United States.

[mertensv16]

With respect, you've misread Pollock. That decision held only that a tax on investment income, such as rents, dividends, and interest, was equivalent to a tax on the underlying property that produced the income, and that since a tax on such property would be a direct tax, so was a tax on the income. The Court's holding that the tax was direct was not in any way based on the fact that the person who had to pay the tax was the owner of the property.

Moreover, Pollock did not overrule the Springer case, which held that (in its view) the only direct taxes under the constitution were capitation taxes and taxes on land, and that the the income tax on Mr. Springer's personal earnings was neither, but was in the nature of a duty or an excise. Pollock differed from Springer only in that it extended the notion of a direct tax to a tax on personal investment property and to a tax on the income from real or personal property. It did not, however, hold that a tax on personal earnings was a direct tax. In fact, no court has ever invalidated a tax on wages or personal earnings on the ground that it is a direct tax. There is simply no legal support for such a claim.

[farmer_giles_of_ham]

Originally Posted by mertensv16

Farmer, it'd be nice if you could engage in a civil debate without resorting to name calling, but maybe that's all you have to offer.

Farmer Giles has a sword called "trollsbane" he has been just itching to use...I have nothing to offer at all and no intention of entering any debate or discussion- that would require a controversy. Thats the problem with attorneys, though, by creating a false issue the real one gets ignored. I used to be civil and very complaisant, but i got burned too many times, and you see, that sword, it glows when trolls, orcs, balrogs and other of Saurons's minions are near...did I misjudge your occupation?

Given that the Constitution says there's only one thing Congress can't tax (exports), what other "sources" would be nontaxable?

none, since the question includes both direct and indirect taxes.

If the question is reduced to indirect taxation then you already answered it:

capitation taxes and taxes on land

aka private property. And to this day there is no direct tax on such material, except for contraband. and other forfeitables. And even the States dont tax most things directly- its always an activity that is regulated

income is not property, the source is property. If it belongs to the government they get to tax it. Income is a description, not the thing itself. Its a 'wave' property if you like, income is a metered flow from a source.

[indago]

mertensv16 wrote:

Look, the Supreme Court held in 1880 (33 years before the 16th Amendment) that an income tax on personal earnings was an indirect tax and was constitutional. See Springer v. U.S., 102 U.S. 586 (1880). This case has never been overruled and is still good law.

A tax on incomes derived from property, the Court declared, was a "direct tax" which Congress under the terms of Article I, § 2, and § 9, could impose only by the rule of apportionment according to population. Scarcely fifteen years earlier the Justices had unanimously sustained (4) the collection of a similar tax during the Civil War, the only other occasion preceding the Sixteenth Amendment in which Congress had ventured to utilize this method of raising revenue. — Senate Document 108-17

Note 4 — Springer v US

[psholtz]

Originally Posted by Shoonra

The 16th Amendment authorized Congress to impose a tax on income, without regard as to whether it was called direct, indirect, excise, or anything else. A tax upon income is authorized by the 16th Amendment and characterizing it in some technical way cannot undo that.

The Constitution, and its Amendments, really work better when used to apply restrictions upon the (federal) government, not upon the people or the States.

[ThomPaine]

It is somewhat difficult for me to believe that this thread has dragged on for 14 pages now, despite the fact there are tomes of information available from every conceivable source to prove exactly what the 'income tax' is and what it taxes.

Income has clearly been defined, much of the info is contained earlier in this thread.

The 16th ammendment did not AUTHORISE Congress to do anything that it couldnt already do. It did not CREATE the income tax, neither did it levy it upon anything, expand it or narrow it. It has been explicitly stated over and again that the 16th ammendment gave no new taxing powers to Congress.

The 'income tax' as we know it today IS an EXCISE TAX. This has been confirmed countless times. Whether you think this matters or disagree with it, is irrelevant at the very least. An excise tax is an ACTIVITY TAX. Examples of this are buying cigarettes or beer, manufacturing 'firearms' etc. The source or activity is the root of the tax and the dollar amount determines how much you owe.

Since 'persons' are legal corporations or trusts, they fill out tax forms just like a business or company does, showing gross income, minus deductions and end up with net or taxable income. You then sign that form under penalty of perjury stating all of that income is taxable income.

Like many things, the foundation or basis is flawed. If you start with gross income and that income is not from a taxable source (a grant, life insurance proceeds, etc) then it doesnt matter what the regulations say or what form you fill out, the gross income which you started with is NOT from a taxable source.

If you elect to include it as taxable income and sign your legal name to it, the IRS will happily take your payment of taxes, regardless of what the statutes say.

The 'whatever source derived' argument is bupkus at best, but I will save that for another thread.

Most people would be well advised to do some research into the history of the IRS, old income tax laws that were struck down and the do some reading in the codes from the 30's up to the 50s to see what the true nature of the 'income tax' is. The truth is very clearly spelled out in those statutes and regulations, which have not changed in principle in over 80 years.

What was taxed in 1954 is the same thing that is taxed today, income from priviledged activity. Though I knew it already, in a face to face meeting with a DOJ official, I was told that I was not in their jurisdiction if I was not a 'priviledged person'

end of rant.

Thom

[indago]

Shoonra wrote:

The 16th Amendment authorized Congress to impose a tax on income, without regard as to whether it was called direct, indirect, excise, or anything else.

This has already been addressed: see post #54

[mertensv16]

Originally Posted by ThomPaine

The 'income tax' as we know it today IS an EXCISE TAX. This has been confirmed countless times. Whether you think this matters or disagree with it, is irrelevant at the very least. An excise tax is an ACTIVITY TAX. Examples of this are buying cigarettes or beer, manufacturing 'firearms' etc. The source or activity is the root of the tax and the dollar amount determines how much you owe.

The legal definition of an "excise", as that term is used in the Constitution, covers a lot more things than manufacturing or selling, and it does not necessarily involve any kind of governmental privilege (it may, but it doesn't have to). For example, if I give my property to someone else, Congress can tax the transaction even though there's no privilege involved. The last time the Supreme Court gave a definition of an excise was when it upheld the constitutionality of the gift tax:

“Whatever may be the precise line which sets off direct taxes from others, we need not now determine. While taxes levied upon or collected from persons because of their general ownership of property may be taken to be direct, Pollock v. Farmers' Loan & Turst Co., 157 U.S. 429 , 15 S. Ct. 673; Id., 158 U.S. 601 , 15 S. Ct. 912, this court has consistently held, almost from the foundation of the government, that a tax imposed upon a particular use of property or the exercise of a single power over property incidental to ownership, is an excise which need not be apportioned, and it is enough for present purposes that this tax is of the latter class. Bromley v. McCaughn, 280 U.S. 124 (1929) (emphasis added)

Later on, the Court held that the mere receipt of property could be the occasion for the imposition of an excise:

If the gift of property may be taxed we cannot say that there is any want of constitutional power to tax the receipt of it, whether as the result of inheritance, Stebbins v. Riley, 268 U.S. 137 , 45 S.Ct. 424, 44 A.L.R. 1454, or otherwise, whatever name may be given to the tax, and even though the right to receive it, as distinguished from its actual receipt and possession at a future date, antedated the statute. Receipt in possession and enjoyment is as much a taxable occasion within the reach of the federal taxing power as the enjoyment of any other incident of property. Fernandez v. Wiener, 326 U.S. 340 (1945)

So it seems pretty clear that the mere receipt of income is a sufficient basis for the imposition of an excise. No privileged activity is required.

What was taxed in 1954 is the same thing that is taxed today, income from priviledged activity.

As shown above, privileged activity is not required for the imposition of an income tax. I'll give the best example of this in a second, but first ask yourself this question -- if a governmental privilege is some kind of official grant of permission to do something (like operating as a corporation) or some sort of connection with the government whereby a benefit is bestowed (like working for the government or entering into a contract with the government), what would be the exact opposite? Well, wouldn't it be activity that is prohibited by the government? For example, if the government makes it a crime to extort money from someone else or to sell certain drugs or to embezzle money from your employer, it'd be crazy to say that that kind of activity is "privileged", wouldn't it?

Yet income derived from illegal activities had been held to be taxable for years. Remember how they got Al Capone? See James v. U.S., 366 U.S. 213 (1961) and the cases it cites.