General Discussion about Taxes

[mr.yet]

Income Tax ????

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In the never ending debate about Income Tax I have a question.

If there are over 22 thousand pages of Tax Code and if a Direct Tax in unconstitutional, how can anyone get the right answer?

I seriously doubt if even the judges and the IRS themselves fully understand the true meaning of these vague and misleading codes .

How does not obtain the correct answer in regards to Tax?

Who you be the right person to contact?

[REDCLOUD]

Amendment XVI (the Sixteenth Amendment) of the United States Constitution, authorizing income taxes in their present form, was ratified on February 3, 1913. The amendment states:

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.

Contents


* 1 Background
* 2 Ratification process
* 3 Interpretation
o 3.1 Early decisions
o 3.2 Modern interpretation
* 4 Tax protester arguments regarding ratification
* 5 External links



Background

The U.S. Constitution provides (in part):

The Congress shall have power To lay and collect Taxes, Duties, Imposts and Excises [ . . . ] but all Duties, Imposts and Excises shall be uniform throughout the United States [ . . . ]

U.S. Const., art. I, § 8, cl. 1.

The Constitution also provides (in part):

Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers [ . . . . ]

U.S. Const., art. I, § 2, cl. 3.

The Constitution further provides:

No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

U.S. Const., art. I, § 9, cl. 4.

The power to impose taxes (whether deemed direct or indirect taxes) is granted by Article I, section 8, clause 1. Indirect taxes (or "excises," in the parlance of the text of the Constitution) are required to be geographically uniform, according to Article I, section 8, clause 1 and the court decisions interpreting that provision (see Knowlton v. Moore, 178 U.S. 41 (1900) and Flint v. Stone Tracy Co., 220 U.S. 107 (1911)). Until the ratification of the Sixteenth Amendment, all direct taxes were required to be apportioned among the states according to each state's population, per Article I, section 2, clause 3 and Article I, section 9, clause 4. This essentially meant that the dollar amount of direct taxes imposed on the taxpayers in any given state was required to bear a relationship to the total dollar amount of direct taxes imposed in the entire nation that was equal to the ratio of that state's population to the total population of the nation.

The Wilson-Gorman Tariff Act of 1894 attempted to impose a federal tax of 2% on incomes over $3,000. Derided by its opponents as "communistic," it was challenged in federal court. Until that time, direct taxes had been deemed to include only capitations, or poll taxes (taxes directly on persons) and property taxes imposed on property by reason of its ownership (generally, ordinary ad valorem property taxes). Until 1895, all income taxes -- regardless of the sources of the incomes -- had been considered indirect taxes ("excises"). Indirect taxes are not required to be apportioned among the states according to the population, but are required to be imposed in all states (that is, are required to be geographically uniform).

In the case of Pollock v. Farmers' Loan & Trust Co. 157 U.S. 429 (1895), aff'd on reh'g, 158 U.S. 601 (1895), the Supreme Court declared taxes on income from property under the 1894 Act to be unconstitutional unapportioned direct taxes. The Court reasoned that a tax on income from property should be treated as a tax on "property by reason of its ownership," and should therefore be required to be apportioned. The reasoning was that taxes on the rents from land, the dividends from stocks and so on burdened the property generating the income in the same way that a tax on "property by reason of its ownership" burdened that property.

This meant that, after Pollock, while income taxes on income from labor (as indirect taxes) were still not required to be apportioned by population, taxes on interest, dividends and rent income were required to be apportioned by population. The Pollock ruling made the source of the income (e.g., property versus labor, etc.) relevant in determining whether the tax imposed on that income was deemed to be "direct" (and thus required to be apportioned among the states according to population) or, alternatively, "indirect" (and thus required only to be imposed with geographical uniformity).

During this period from 1895 to 1913 when the Sixteenth Amendment was ratified, while Congress could have re-imposed taxes on income from labor and other non-property sources without apportionment by population, imposing taxes on interest, dividends and rent income would not have been practical (as the income from property in each state would virtually never correspond to the population of that state in relation to the population of the entire nation). The Congress was unwilling to impose an income tax on labor and other non-property sources without also imposing a tax on income from property -- and taxes on income from property were no longer realistic. The Pollock ruling made imposition of an income tax politically unfeasible from 1895 until the ratification of the Sixteenth Amendment. At the same time, Congress was reflecting the growing concern among many elements of society that the wealthiest Americans had consolidated too much economic power.


Ratification process

In response to these developments, the Sixteenth Amendment was passed by the Sixty-first Congress and submitted to legislatures of the several states on July 12th, 1909. The amendment was the crowning feature of a larger trend of legislative action meant to curb the power of the wealthy. The famous Pujo Committee Hearings, which aired the ******uous relationship between banks and corporate interests, were held during ratification, and the Clayton Antitrust Act was enacted shortly thereafter.

On February 25, 1913, the Republican Secretary of State Philander Knox proclaimed that the amendment had been ratified by the necessary three-quarters of the states ensuring the constitutionality of unapportioned federal income taxes.

The amendment was ratified by 38 states in all: Alabama on August 10, 1909, Kentucky on February 8, 1910, South Carolina on February 19, Illinois on March 1, Mississippi on March 7, Oklahoma on March 10, Maryland on April 8, Georgia on August 3, Texas on August 16, Ohio on January 19, 1911, Idaho on January 20, Oregon on January 23, Washington on January 26, Indiana and Montana on January 30, California and Nevada on January 31, South Dakota on February 3, Nebraska on February 9, North Carolina on February 11, Colorado on February 15, North Dakota on February 17, Kansas on February 18, Michigan on February 23, Iowa on February 24, Missouri on March 16, Maine on March 31, Tennessee on April 7, Arkansas on April 22, Wisconsin on May 26, New York on July 12, Arizona on April 6, 1912, Minnesota on June 11, Louisiana on June 28, West Virginia on January 31, 1913, New Mexico on February 3 (the 36th state to ratify), Massachusetts on March 4, and New Hampshire on March 7. Arizona and New Hampshire ratified after an earlier rejection. Ratification was rejected by Connecticut, Rhode Island, and Utah.


Interpretation

The Amendment -- which overrules the effect of Pollock -- essentially means that when imposing an income tax, the Congress may impose the tax on income from any source without having to apportion the total dollar amount of tax collected from each state according to each state's population in relation to the total national population.

The Supreme Court's interpretation of the Sixteenth Amendment has evolved and adapted considerably over time. Many disputes about the applicability of the amendment to specific types of income spring from reliance on the language of out-dated interpretations and overturned decisions.


Early decisions

In Brushaber v. Union Pacific Railroad, 240 U.S. 1 (1916), the Supreme Court indicated that the Sixteenth Amendment did not give the Congress a new power to tax incomes, as Congress already had that power. Although an income tax on income from property had been deemed (under Pollock, above) to be a direct tax, and an income tax on wages, etc., had been deemed to be an indirect tax (an excise), the Court in Brushaber decided that, after the Sixteenth Amendment, the Constitution allows Congress to tax any incomes without apportionment among the states by population (and without regard to any census or enumeration) regardless of the source of the income -- that is, regardless of whether the particular income tax is deemed direct (such as a tax on income from property) or indirect (i.e., an excise, such as a tax on income from labor). The Sixteenth Amendment made the distinction between a direct tax and an indirect tax constitutionally irrelevant with respect to the apportionment of income taxes by removing the apportionment requirement for income taxes. In Brushaber, the Court upheld the validity of the Federal income tax statute under the U.S. Constitution as amended by the Sixteenth Amendment.

[REDCLOUD]

In the Supreme Court case of Bowers, Collector v. Kerbaugh-Empire Co., 271 U.S. 170 (1926), Mr. Justice Butler stated:

It was not the purpose or the effect of that amendment to bring any new subject within the taxing power. Congress already had the power to tax all incomes. But taxes on incomes from some sources had been held to be "direct taxes" within the meaning of the constitutional requirement as to apportionment. [cites omitted] The Amendment relieved from that requirement and obliterated the distinction in that respect between taxes on income that are direct taxes and those that are not, and so put on the same basis all incomes "from whatever source derived". [cites omitted] "Income" has been taken to mean the same thing as used in the Corporation Excise Tax of 1909 (36 Stat. 112), in the Sixteenth Amendment, and in the various revenue acts subsequently passed. [cites omitted] After full consideration, this court declared that income may be defined as gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital.

Although the Sixteenth Amendment is often cited as the "source" of the Congressional power to tax incomes, at least one court has reiterated the point made in Brushaber and other cases that the Sixteenth Amendment itself did not grant the U.S. Congress the power to tax incomes (a power Congress has had since the late 1700s), but only removed the requirement, if any, that any income tax be apportioned among the states according to population:

In dealing with the scope of the taxing power the question has sometimes been framed in terms of whether something can be taxed as income under the Sixteenth Amendment. This is an inaccurate formulation [ . . . ] and has led to much loose thinking on the subject. The source of the taxing power is not the Sixteenth Amendment; it is Article I, Section 8, of the Constitution.

Penn Mutual Indemnity Co. v. Commissioner, 32 T.C. 653 at 659 (1959).


Modern interpretation

In Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955), the Supreme Court laid out what has become the modern understanding of what constitutes 'income' to which the Sixteenth Amendment applies, declaring that income taxes could be levied on "accessions to wealth, clearly realized, and over which the taxpayers have complete dominion." Under this definition, any increase in wealth—whether through wages, benefits, bonuses, sale of stock or other property at a profit, bets won, lucky finds, awards of punitive damages in a lawsuit, qui tam actions—are all within the definition of income, unless Congress makes a specific exemption (as it has for things like gifts, bequests, and certain scholarships).




Tax protester arguments regarding ratification

Some tax protesters, conspiracy theory proponents, and others opposed to income taxes in general cite what they contend is evidence that the Sixteenth Amendment was never "properly ratified." One argument is based on the contention that the legislatures of various states passed bills of ratification with different capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas). Another argument made by some tax protesters is that because Congress did not pass an official proclamation recognizing Ohio's year 1803 admission to statehood until 1953 (see Ohio Constitution), Ohio was not a state until 1953 and therefore the Sixteenth Amendment was not properly ratified. These arguments have been universally rejected by the courts.

[REDCLOUD]

The term direct tax has more than one meaning: a colloquial meaning and, in the United States, a constitutional law meaning. Certain taxes may be direct taxes in the colloquial sense but indirect taxes in the constitutional sense.

In the colloquial sense, a direct tax is one paid directly to the government by the persons (legal or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax or "collected" tax (such as sales tax or value added tax (VAT)); a "collected" tax is one which is collected by intermediaries who turn over the proceeds to the government and file the related tax return.

In the United States, the term "direct tax" has a different meaning for the purposes of constitutional law. Traditionally a direct tax in the constitutional sense means a tax on property "by reason of its ownership" as well as a capitation (a "head tax"). In the late 1800s, U.S. courts also began to treat an income tax on income from property as a direct tax.

In this U.S. constitutional law sense, an "indirect tax," or "excise," is an "event" tax. In this sense, a transfer tax (such as gift tax and estate tax) is an indirect tax. Income taxes on income from personal services such as wages are also indirect taxes in this sense.

In the United States, Article I, Section 9 of the constitution requires that direct taxes imposed by the national government be apportioned among the states on the basis of population; this provision made it difficult for Congress to impose a national income tax that applied to all forms of income until the 16th Amendment was ratified in 1913. After the Sixteenth Amendment, no Federal income taxes are required to be apportioned, regardless of whether they are direct taxes (taxes on income from property) or indirect taxes (all other income taxes).

What about the 861 argument Redcloud.

[powder]

Show me the contract that created the obligation which some people call "Income Tax".

[ezrhythm]

Aaah! EXCELLENT!


Again... It's ALL commerce.

[powder]

Mr. Tax Collector, I am just here to help you settle and close the account. Please show me the contract that binds me. In addition, please identify how many points there are to an assessment.

I am just here to help settle and close the account.....

[charlesa6]

Originally Posted by ezrhythm

Aaah! EXCELLENT!


Again... It's ALL commerce.

Yeah, that all come down to be.

[FreeFromContract]

Originally Posted by REDCLOUD

In this U.S. constitutional law sense, an "indirect tax," or "excise," is an "event" tax. In this sense, a transfer tax (such as gift tax and estate tax) is an indirect tax. Income taxes on income from personal services such as wages are also indirect taxes in this sense.

In the United States, Article I, Section 9 of the constitution requires that direct taxes imposed by the national government be apportioned among the states on the basis of population; this provision made it difficult for Congress to impose a national income tax that applied to all forms of income until the 16th Amendment was ratified in 1913. After the Sixteenth Amendment, no Federal income taxes are required to be apportioned, regardless of whether they are direct taxes (taxes on income from property) or indirect taxes (all other income taxes).

It's not about just any event, it's about a regulated or privileged event. But what is funny (if not pathetic) about the whole affair is that even the district courts can't agree if the income tax is a direct or indirect tax.

Regardless, the question to be asked is what is it that has turned a God given (unalienable) right to earn a living into a priviliged activity.